14 January 2004 Arlington, VA Lightwave -- Total spending in the U.S. telecommunications industry rose 4.7% in 2003 to an estimated $720.5 billion, according to the recently released 2004 edition of the "Telecommunications Market Review and Forecast, " an annual study published by the Telecommunications Industry Association (TIA).
Double-digit increases in wireless services, services in support of equipment, specialized services (unified communications, video- and audio-conferencing, and high-speed Internet access) offset decreases in equipment spending and local- and toll-service revenues. The U.S. telecommunications industry will grow at a projected 9.2% compound annual rate from 2004 to 2007, reaching $1 trillion.
A turnaround is in sight for U.S. telecommunications equipment spending. The network equipment market bottomed out in 2003 at $14 billion, and a 2.3% increase to $14.4 billion is predicted for 2004. Service providers are looking to voice-over-Internet-protocol (VoIP), bundled services, data transport, and TV to generate additional revenue, which will require new investment in equipment. By 2007, network equipment spending will total $18.5 billion, climbing at a 7.0% compound annual rate from 2003.
The enterprise equipment market expanded 3.9% to $94 billion in 2003. In the enterprise, the shift to IP is boosting most segments of equipment spending. After declining in the previous three years, the PBX market bounced back in 2003, for example, with a 12% increase, reaching $4.2 billion on the strength of growing IP-PBX sales. Video-conferencing was the fastest-growing segment, jumping 28.6% and reaching $900 million.
Spending on transport services was essentially flat in 2003 at $285 billion. Local exchange revenues went down 2.9% to $118 billion following a 3.3% decrease in 2002. Toll-service spending fell 8.2% to $78 billion, its third consecutive decrease as the shift from wireline to wireless in long-distance traffic continued. Offsetting these declines in 2003 was a 14.3% increase in wireless services to $89 billion, surpassing toll services for the first time. The services market is undergoing a transformation as more consumers are relying exclusively on wireless, VoIP is growing, and the distinction between local and long distance is disappearing.
Broadband services continue to gain traction. Spending on high-speed Internet access services (including cable modems, digital subscriber line [DSL], fixed wireless, satellite and fiber-to-the-home) reached $13 billion in 2003 and TIA expects growth to $25 billion by 2007. The overall specialized services category, defined above, is a rapidly growing segment of the industry, growing from $18.2 billion in 2003 to $34.7 billion in 2007.
The U.S. wireless market consists of transport services, handsets, infrastructure including Wireless Fidelity (Wi-Fi) equipment and professional services in support of the wireless infrastructure. Spending in 2003 totaled $134.5 billion, up 7.9% from 2002. Wi-Fi represents a small but rapidly growing component of the wireless communications services, and spending on Wi-Fi services is predicted to increase from $21 million in 2003 to $270 million by 2007.
International telecommunications spending (not including U.S. figures) is predicted to total an estimated $1.5 trillion in 2004, up 10.3% over 2003. TIA expects high-speed Internet access to be the principal driver of equipment spending. International spending on telecommunications equipment is predicted to increase by 5.4% in 2004 to $260.1 billion and then to grow at high single-digit rates through 2007. Overall international telecom spending is expected to reach $2 trillion in 2007, growing at a compound annual rate of 10.5% from 2004 through 2007.
TIA's "2004 Telecommunications Market Review and Forecast" provides an overview of telecom's interrelated market segments including network services, enterprise and consumer, mobile and wireless communications, and international markets. For more information, visit www.tiaonline.org.