Service-provider capex budgets improving

Oct. 1, 2004

Worldwide service-provider capital-expenditure (capex) budgets totaled $196 billion in 2003, down about 4% from 2002. However, high-tech market researcher In-Stat/MDR (Scottsdale, AZ) expects worldwide service-provider capex to begin turning around this year, with about a 2% growth in spending as service-provider financials improve and the economy grows.

Service-provider capex budgets have been shrinking since they peaked in 2000, when worldwide budgets were about 31% of service revenues in 2000. Capex budgets further declined to about 20% of services revenues last year. Service providers have been reducing capital investments to improve their near-term profitability, as their overall revenues have remained relatively flat. Last year, they reduced their spending on WAN equipment, including voice circuit switches, mobile wireless infrastructure, multiservice switches, and optical transport equipment. Instead, they purchased more packet telephony equipment, including gateways and softswitches, to replace voice circuit switches.

In the future, service providers will invest in equipment that will enable them to converge their networks to reduce capital and operational costs as well as to attain new service revenues. The report predicts particularly strong sales this year for packet telephony equipment to converge voice on IP networks; edge routers to support multiple services; and core routers for converged MPLS core networks.

Sales should also be robust for multiservice provisioning platforms for next-generation SONET/SDH to support Ethernet services and DSLAMs to serve the growing number of broadband users with high-bandwidth requirements.

For more details about the report, “State of the Service Provider WAN Equipment Market-2004,” visit