TIA study: 2006 U.S. telecom's strongest year
by Dan O'Shea - Telephony Magazine

The good news is that, according to the Telecommunications Industry Association's recently released “2007 Telecommunications Market Review and Forecast,” total U.S. market revenue grew by 9.3% to $923.5 billion in 2006 — the biggest increase since 2000. The slightly less positive news is that while the market will continue to grow for the rest of this decade, that growth will moderate to a compound annual increase of 7.6% per year through 2010.

All this means is that 2006 may prove to be the pivotal year for the U.S. industry this decade. Arthur Gruen, principal at Wilkofsky Gruen Associates, which compiled the 300-page-plus study, said industry consolidation, bundling and increasing competition likely will affect pricing and revenue growth for the rest of the decade, but that categories such as wireless, broadband, video and unified communications will continue to introduce new revenue. “When you look at the growth [in 2006], the industry is in a period of sustainable growth,” Gruen said. “It's gradually recovered from a period of growth that wasn't sustainable, when supply was bigger than demand.”

Grant Seiffert, TIA president, added, “Technologies like VoIP and broadband video, as well as new mobile data services, are sparking new growth in the telecommunications industry.”

In regard to broadband, the report said that DSL pricing will continue to trend upward to an average of $38.67 in 2010, while cable modem pricing trends downward to about $38.49 the same year — one of the factors in how the DSL market could further close the lead the cable modem market currently has in terms of revenue and subscribers. Total U.S. DSL revenue in 2010 is expected to be $18.4 billion from 39.7 million subscribers, while cable modem revenue will sit slightly higher at $19.9 billion from 43.1 million subscribers.

But Teresa Mastrangelo, principal analyst at broadbandtrends.com, pointed out that a number of factors are at play in broadband access, with fiber to the home not coming into its own as a service until 2008. She also questioned the reports's pricing trends.

“It doesn't feel like cable modem pricing is coming down, and I think the nature of discounting is changing,” she said. “Service providers are starting to stress quality instead of price and are doing things like charging more for better service or a guarantee. You saw telcos doing 12-month DSL promotions, but now they are going shorter with those promos and doing different things. Bundling also is going to start having an effect, so it's not clear to me those pricing trends will continue.”

The study forecasts that about 77% of all residential telecom service subscriptions will be part of a broader service bundle in 2010, up from 28% last year. Meanwhile VoIP will be part of 34% of residential subscriptions in 2010, up from 10% last year.

The study also featured research on the global telecommunications industry, finding that telecom revenue worldwide amounted to $3 trillion in 2006, up more than 11% from the previous year. It is expected to reach $4.3 trillion in 2010, while U.S. market revenue hits $1.2 trillion that year, Gruen said.

The total U.S. wireless industry revenue came in at $129 billion for 2006 and is expected to grow to $184.5 billion in 2010. Mobile entertainment applications will account for a whopping 56% of that growth, Gruen said. Mobile voice revenue will continue to grow, but only about 5% per year, while other mobile data services bring in revenue growth averaging 36% per year

Meanwhile, U.S. wireless market penetration should be about 87% in 2010, up from 72% last year, but still short of a handful of countries that already report more than 100% mobile penetration.


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