U.S. TELECOM REBOUND SAID TO BEGIN IN 2003

TIA Pres. Matthew Flanigan said he expected ILECs to start investing in telecom market influenced by regulatory relief they received from FCC’s UNE-P decision last week: “They must invest to remain competitive” and “to maintain their customer base that is slowly being eroded.” He said ILECs, which “are falling further behind in deployment of broadband” should use regulatory relief and “invest in their own fiber.”

Sharp drop in equipment spending, which fell by combined 24% over last 2 years, was “defining trend” in U.S. telecom, TIA said. It said enterprise equipment, largest sector of market, slightly increased, but that gain was offset by decreases in network equipment, consumer telecom equipment, wireless capital expenditures and wireless handsets. TIA predicted spending on enterprise voice/data equipment would increase by 6.1% to $91.7 billion in 2003, stimulated by migration to next-generation technologies.

Rebound of total U.S. telecom market, which will begin this year, will be led by spending in specialized services category, including high-speed Internet access, applications such as unified messaging, and videoconferencing and audioconferencing services, TIA said. According to report, spending on specialized services will increase 37% to $21.3 billion in 2003, from $15.6 billion in 2002 and would reach estimated $39 billion in 2006, growing at 26% compound annual rate. Report said increase in carrier revenue driven by specialized services would raise demand for gear. It said by 2006, equipment spending in U.S. would reach $174 billion, climbing at 7.1% compound annual rate from 2003, when carrier spending on equipment would increase by 5.8%, reaching $23.2 billion, up from $22 billion in 2002.

Total wireless communications spending would increase to $164.5 billion from $123.4 billion in 2003-2006 at 9.6% compound annual rate, driven mainly by growth in Internet access and text messaging, report said. It said WLANs (wireless local area networks), including WiFi would encourage robust growth in wireless market as number of “hot spots” was rising rapidly and access points appearing in numerous public places with high concentration of users. It said carrier spending equipment related to creation of those networks will lead to increase in wireless Internet traffic boosting overall network traffic and stimulating spending on network equipment for licensed, unlicensed and land line carriers. Number of high-speed subscribers, including DSL, cable, fixed wireless, fiber-to-the-home, satellite and 3G, is expected to rise to 40 million in 2006 from 15 million in 2002, generating significant growth in network traffic.

International telecom market will grow faster than U.S. market, driven by robust growth in wireless services, TIA said. Arthur Gruen, principal author of report, said he expected international growth of 3G services would be “at least 50% or twice as much compared to the U.S.” International telecom spending growth rates will total about $1.4 trillion in 2003, up 10.1% over 2002, report said. It said international telecom spending will reach $1.5 trillion in 2004 and grow more than 10% annually through 2006, reaching $1.9 trillion in 2006. Gruen said 3G roll out “started to take off in Europe and Asia already and we expect some significant growth to begin in 2004-2005.” He said absence of 3G license in U.S. was delaying domestic 3G roll out: “That will need to be worked out before [3G] roll out really occurs in the U.S.” However, he said, there was “some spectrum available, and by the end of this forecast period we should start to see some significant numbers on 3G side here.”