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The Slump is Over: Industry Groups Forecast 2005 Growth

Kelly Teal

April 1, 2005

3 Min Read
The Slump is Over: Industry Groups Forecast 2005 Growth

It looks as though the slump is officially over as several experts predict the telecom industry is poised for a big breakthrough in 2005, thanks especially to equipment sales, and the adoption of VoIP and other broadband technologies.The Telecommunications Industry Association even projects the U.S. telecom industry will grow at a 9.5 percent compound annual growth rate (CAGR) between 2005 and 2008, reaching $1.1 trillion. Thats a far cry from the nuclear winter of 2000-2003.The growth, according to TIA, comes partly from the network equipment market, which the firm says started emerging from its slump last year, recording a nearly 5 percent advance, or $15.8 billion. The companys report, 2005 Telecommunications Market Review and Forecast, notes the reversal stems from the markets evolution toward integrated full-service providers offering bundled services at flat rates. With fiber continuing to be the principal driver of growth in this market, network equipment revenue is expected to increase 9 percent in 2005 to reach $17.3 billion and achieve a 8.4 CAGR 2005-2008, reaching $22 billion in 2008, according to the annual study.Enterprise equipment also will make its mark in 2005, with spending expected to reach nearly $106 billion this year. Thats a 6.8 percent increase over 2004, TIA says.The news that should come as no shock to partners is the shift to VoIP that will drive the enterprise and residential markets. The number of VoIP access lines jumped to 6.5 million in 2004 from 3.8 million in 2003, and is expected to expand rapidly, rising to an estimated 26 million by 2008, TIA writes in the report.The topic of VoIPs effectiveness and adoption, however, remains much-debated. Deloitte, in its Wireline Predictions 2005 Report and Mobile and Wireless Predictions 2005 Report, contends most voice calls still will originate and terminate on the PSTN this year because VoIP offers less-than-superior quality.Deloitte does concede that VoIP call volume and the user base will increase significantly among consumers and businesses. Yet, the company writes in its report that VoIP adoption will be limited by shortfalls in quality, consistency and reliability and the resulting slightly negative image in the marketplace.VoIP isnt the only technology much of the industry sees as promising. Insight Researchs 2005 Telecom Industry Review: An Anthology of Market Facts and Forecasts says in addition to VoIP, the rapidly growing segments of Wi-Fi, streaming media, fiber optics, DWDM and WDM will help sales grow from $1.1 trillion this year to $1.5 trillion in 2010.The malaise of the past few years is finally beginning to dissipate, and while we see a return to historic levels of growth industry-wide, we anticipate that growth will be uneven across various geographic regions and product types, says Insight Research President Robert Rosenberg. Asia-Pacific and Latin America/Caribbean are forecasted to enjoy the fastest overall broadband growth while North America and Europe lag. Wireless communications will continue to displace wireline communications for voice calling and as the number of wireless 2.5G and 3G data services increases, wireless will continue to squeeze traditional landline calling.  Deloitte adds that by the end of 2005, there will be nearly 2 billion cellular mobile subscriptions worldwide. The best opportunities for agents revolve around penetration in developing countries including Asia and Latin America, as well as phone personalization such as ring tones, real tones, wallpapers and games.

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About the Author(s)

Kelly Teal

Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC. Follow her on LinkedIn at /kellyteal/.

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