July 27, 2004 Scottsdale, AZ--Worldwide service provider capital expenditure (capex) budgets totaled $196 billion in 2003, which was a drop of about 4% from 2002, reports In-Stat/MDR. The market researcher expects that worldwide service provider capex spending will begin to turn around in 2004, with about a 2% growth in spending, as service provider financial situations improve and the economy grows.
"Service provider capex budgets have been shrinking since they peaked in 2000, when the investment bubble broke," says Henry Goldberg, a senior analyst with In-Stat/MDR. Worldwide capex budgets were about 31% of services revenues in 2000, and have declined to about 20% of services revenues in 2003.
"Service providers have been reducing capex investments to improve their near-term profitability, as their overall revenues have remained relatively flat," says Goldberg. In 2003, service providers reduced their spending on such WAN equipment as voice circuit switches, mobile wireless infrastructure, multiservice switches, and optical transport equipment. Service providers purchased more packet telephony equipment, packet telephony gateways and softswitches, to replace voice circuit switches. There was also a major increase in purchases of DSLAMs to support the rapidly growing number of broadband (DSL) subscribers.
In-Stat/MDR has also found that:
The single largest component of worldwide WAN equipment sales was mobile wireless infrastructure, which was about 29% of total worldwide network capex budgets.
Voice circuit switches are still the largest component of capex for wireline networking hardware, though their share has been declining over time.
Data switches/routers/gateways accounted for about 7% of 2003 WAN equipment sales to service providers, and are becoming a growing percentage of sales as data and packet voice traffic and services grow, relative to circuit-switched voice.
In the future, service providers will invest in equipment that will enable them to converge their networks to reduce capital and operations costs, as well as to attain new services revenues. In-Stat/MDR forecasts particularly strong growth in sales in the following areas in 2004: packet telephony equipment to converge voice on IP networks, edge routers to support multiple services, core routers for converged multi-protocol label switching (MPLS) core networks, multiservice provisioning platforms (MSPPs) for next-generation SONET/SDH supporting Ethernet services, and DSLAMs to serve the growing number of broadband users with high-bandwidth application requirements.
The report "State of the Service Provider WAN Equipment Market - 2004" provides a unique breakout of the various areas of service provider WAN equipment spending that comprise these budgets. Five-year forecasts of worldwide WAN equipment sales to service providers are provided for a number of areas that In-Stat/MDR has recently researched. These include mobile wireless infrastructure, voice circuit switches and packet telephony equipment, multiservice switches, edge and core routers, IP service switches, optical transport equipment (including MSPPs), DSLAMs, and telco servers.