Total spending in the U.S. telecommunications industry rose 8.9% in 2005 to an estimated $856.9 billion and is expected to climb 10.2% this year reaching $944.7 billion, according to the newly released "TIA's 2006 Telecommunications Market Review and Forecast."
This growth was led by double-digit increases in network equipment, wireless devices, wireless services, services in support of equipment, Internet access, unified communications, videoconferencing public room services and Web conferencing. The U.S. telecommunications industry will grow at a projected 9.0% compound annual growth rate (CAGR) 2006-2009, reaching $1.2 trillion.
The Market Review and Forecast is an annual study published by the Telecommunications Industry Association (TIA). The study is an overview of telecom's interrelated market segments including landline network, enterprise and consumer, wireless communications, and international markets.
Total international communications spending (not including the United States) reached $1.8 trillion in 2005, up 11.4% over 2004, fueled by double-digit increases in wireless transport services, Internet access, public network equipment and professional services in support of public network and enterprise equipment. Middle East/Africa was the fastest- growing region in 2005, with an 18.4% advance to $66.7 billion. Overall international telecommunications spending is expected to reach $2.7 trillion in 2009, growing at a 10.4% CAGR 2006-09.
"The statistics in our new report reveal the telecom industry is expanding once again. The U.S. market is back on an upward path and the international markets are growing even faster. With revenues from international markets more than double that of the U.S., the global marketplace is clearly where companies must compete," states TIA President Matthew Flanigan.
A 5.4% increase in total U.S. equipment and software in 2005 marked continued gains in that sector, reaching $165.7 billion in 2005. A principal driver of this growth was revenue from wireless devices. In 2005, wireless devices revenue reached $15 billion, a 22.6$% increase over 2004. Network equipment revenue rose over the past two years after falling 71% between 2000 and 2003, with increased spending on optical fiber cable the principal driver of the rebound. Rising traffic in the network is fueling the demand for fiber. Although not regaining its prior high levels, fiber revenue in 2006 will climb to more than half that of 2000 and will be a catalyst for growth rather than for decline over the next four years. Total revenue in the network equipment and facilities market is expected to reach $20.9 billion in 2006 and achieve a 5.2% CAGR 2006-2009, reaching $24.4 billion in 2009.
The U.S. enterprise equipment market expanded 6.9% to $98.3 billion in 2005. In the enterprise market, the long-heralded move to convergent technologies is now taking off and Internet protocol (IP) equipment and IP-based services are beginning to replace legacy technologies. As legacy equipment ages, replacement demand, along with rapid growth in video-conferencing and unified communications, will continue to fuel spending. Total spending on enterprise equipment is expected to reach $104.5 billion in 2006, a 6.3% increase over 2005.
Spending on transport services in the United States increased 4.2% in 2005, reaching $310.8 billion. Landline revenue continued to fall in 2005, recording its fifth consecutive year of decline, and wireless continued to grow at double-digit rates. Total landline revenue in 2005 reached $192.3 billion, a 1.4% decrease over 2004; wireless services revenue reached $118.6 billion in 2005, a 14.8% increase over 2004. The downward trend in landline spending is the result of the erosion in landline subscribers. For example, with broadband Internet subscribership on the rise, the need for a second line to support dial-up Internet access has declined. In 2005, the number of wireless subscriptions, 194.5 million, passed landline subscriptions, 172.1 million, and with approximately two-thirds of the U.S. population subscribing to a wireless service, the market still has room for expansion. TIA expects wireless penetration to rise to 88% by 2009, which would translate into 270 million subscribers. Landline subscriptions will continue to fall, but the rate of decline will moderate as new services such as voice over Internet protocol (VoIP) and broadband video help landline carriers retain subscribers.
Internet access revenue rose 10.2% in 2005, fueled by rising broadband penetration. The U.S. broadband market has grown explosively from 4.5 million high-speed Internet access subscribers in 2000 to 41.2 million in 2005. Broadband Internet access has become a central offering for carriers. Landline carriers and cable operators are competing with steep discounts and faster speeds, which is propelling the market and hastening the transition from dial-up to broadband. By 2009, nearly three-quarters of subscribers will access the Internet via broadband connection. Overall spending on Internet access services is predicted to increase at a 5.3% CAGR to an estimated $34.8 billion by 2009.
The TIA is based in Arlington, VA. For more information visit www.tiaonline.org.