Carriers' capex bottoming out this year

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Today's carriers continue to strive for a positive balance sheet, and cutting capital expenditures (capex) remains the quickest way to achieve this objective. From the height of the telecom bubble in 2000 to the end of this year, capex will have fallen 60%, a difference of USD62 billion and hundreds of bankruptcies, contends a new report from iSuppli (El Segundo, CA). However, the spending decline should hit bottom by the end of this year, say analysts. Near-term, equipment vendors would do well to tailor their product offerings to satisfy carriers' current needs.

According to the report, "Wired Communications: Capex Still a 'Four-Letter' Word," SONET/SDH will remain king in the metro segment; the move to alternative transport architectures is "virtually dead for now." OEMs should focus on next-generation SONET/SDH equipment and put other technologies on the back-burner, says Steve Rago, iSuppli's principal analyst of networking and optical communications. "The dream is still one of an all-packet network, but the carriers' pocketbooks can only afford more of the same for now," he reports.

To that end, semiconductor suppliers should expedite the development of next-generation SONET/SDH chipsets so OEMs and carriers can start field-trial programs. Highly integrated chipsets will not be required until mass deployment takes place.

Equipment vendors should also target the access and metro edge, which will combine for 54% of capex equipment dollars this year, says the report. Carriers are looking to deploy multiservice platforms that can be remotely and dynamically provisioned. "Issues like quality of service, service-level agreements, reliability, redundancy, latency, transparency, and security need to be addressed on a connection basis and priced accordingly," says Rago. "Carriers want to offer services, not bit transport."

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