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Viodi View Newsletter - February 22nd, 2006

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Telecom is Back
Highlights of TIA's, Feb. 15th, Market Review Press Conference

Alan J Weissberger
[email protected]

[Editor's Note: If you are interested in follow-up research to topics associated with this article, please inform the author of your interests. The author is also actively seeking research related and technology assessment work in Broadband Wireless.]

TIA invited selected media members to what turned out to be a very informative conference call on the status of the telecom market. The purpose was to promote the release of TIA’s 2006 Telecommunications Market Review and Forecast book. A few highlights are presented here. A follow on report will depend on readers communicating their interests to this author.

  • TIA states that the US telecom market increased 8.9% in 2005. Outside the U.S. (ROW) there was 11.4% growth. One of the most dramatic comebacks has been in the network equipment market. Network equipment revenue rose 31% over the past two years after falling 71% between 2000 and 2003. TIA continues to see the positive impact of increased deployment of broadband and IP technologies, thanks at least in part to FCC decisions and President Bush's call for universal availability of broadband by 2007.
  • While TIA forecasts a compound annual growth rate of 9.0% for the U.S. telecom market for the period 2006-2009, they imply that this is predicated on a "clear need" to increase federal funding levels for telecom research. TIA expects government agencies such as NIST and NSF to realize huge funding increases as a result of the President’s proposed budget (which must be passed by Congress).
  • New products and services are emerging as a result of the ability to connect an ever-increasing array of devices to the Internet, as well as the ability to access multiple services through those devices. The result is a voracious demand for bandwidth. Affordable broadband connectivity along with the service convergence via IP make this possible. TIA expects to see a fierce battle between the telcos and the MSOs in their quest to deliver and sell triple and quadruple play service offerings to residential customers. MSOs are teaming with wireless providers (e.g. SPRINT-Nextel) to offer a quadruple play.
  • The key to a successful telco triple play will be the (long promised, but this is the year...) entertainment video service. The delivery of which is now being offered by multiple competitors (primary independent telcos) and over various platforms. The ability of these competitors to enter the marketplace will be further enabled by video franchise reform (VZ has caused this to happen in Texas). National legislation may be necessary to address the need for a streamlined, less burdensome video franchising process through which competition will flourish.
  • Wireless technologies continue to flourish and drive industry investment. 3G network investments are in full swing with rollouts emerging. WiMAX is set to become a larger factor as WiMAX Forum product certifications continue. This June the FCC is scheduled to auction off 90 megahertz of prime, globally harmonized spectrum for advanced wireless services. This includes the spectrum converted from federal use that TIA worked very hard to help secure. They are very excited about the new network build outs and upgrades that will result. TIA expects wireless subscriber growth to slow in percentage terms to 8.5% annually this year. Penetration will increase from 66% in 2005 to 88% in 2009. Revenue will grow at 11.2% annually fueled by 3G, new applications, and more services. New wireless applications are driving device spending
  • International Wireless Markets: TIA sees wireless as a catalyst for growth (GDP). They believe there is enormous potential for expansion, particularly in China and India. Those two countries alone will add more than 400 million wireless subscribers during the next four years. Except for Europe, where the subscriber base is saturated, each region will average double-digit annual growth
  • Landline (AKA Wire-line) Market Developments:
    • RBOCs are now the major long-distance providers (no pure long distance plays left)
    • Standalone long-distance carriers are leaving the market (e.g. SPRINT-Nextel)
    • Non facility based CLECs are investing in their own equipment or leaving the market
    • Cable operators (MSOs) are major telco competitors
    • Broadband is now offered in a bundle with telephone service
    • VoIP is becoming popular, but there are many unresolved issues+ for residential users
    • Television is becoming a necessary component in a residential service bundle
    • Flat rate pricing is replacing per-minute pricing model for long-distance
    • For enterprise customers, IP VPNs are replacing legacy services, e.g. private line, Frame Relay, and ATM
    • E911, battery backup, security, availability, reliability/ single point of failure, and naked DSL availability
  • Key U.S. Regulatory Policy Developments and Implications
    • RBOCs do not have to share high-speed infrastructure with CLEC competitors and ISPs
    • UNE discounts to competitors being phasing out
    • Approval of major landline and wireless mergers have precipitated more aggressive
      investments in infrastructure.
    • Facilities-based providers are best positioned to compete - non facilities CLECs are losing
    • RBOCs stepping up investment in DSL and fiber (primarily for video services)
    • Rulings on broadband networks set the stage for RBOC entrance into commercial TV distribution, while legislative efforts try to speed it up
    • Traditional long-distance companies don’t exist anymore– the standalone long-distance carrier business model no longer works
  • International Internet Access
    • Broadband will be the fastest-growing sector, expanding at a 28.3% annual rate
    • Countries view broadband as essential to compete in the world economy
    • Dial-up growth is also expected in Latin America, Asia/Pacific, and Middle East/Africa, while dial-up in Europe and Canada is declining
  • Key International Market Drivers
    • Governments are actively promoting broadband and encouraging carriers to upgrade
    • Wireless broadband is taking off in Europe
    • Wireless subscriber ship is growing explosively in Asia/Pacific
    • Privatization and increased investment is boosting Middle East/Africa
    • Rising incomes and a stable economic environment are benefiting Latin America
    • Newly launched VoIP, text messaging interoperability, and mobile music are happening
  • Global Telecom Market Summary
    • The telecommunications industry is expanding again
    • The U.S.has returned to an upward path and international markets are growing faster
    • Global growth projected at 10 percent compounded annually through 2009
    • Spending will rise from $2.7 trillion in 2005 to $3.9 trillion in 2009

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