Survey: Equipment spending set to rebound

ATLANTA—Despite rampant talk of carriers reducing equipment spending, a recent Roper Starch survey of carriers and enterprises commissioned by Marconi plc found that 65% of carriers forecast an increase in network investment over the next 12 months. On the enterprise side, 54% of those surveyed answered similarly.

However, the level of increased investment will be modest, with 57% of enterprises and 40% of carriers stating that the increases compared to last year would be 10% or less.

The telecom slump is far from over, according to Jeff Kagan of Kagan and Associates. “I’m seeing a marketplace different from what the survey is talking about,” Kagan said. “We’ve seen the worst but the worst is not over yet.” 

Nicholas Economides, an economics professor at New York University, blamed the equipment spending slowdown on three factors: a fourfold over-estimation of how quickly the Internet would grow; the demise of the competitive local exchange carriers (CLECs), who were held back by the legal maneuvering of the regional Bell operating companies (RBOCs) and the need to buy network elements from them; and the decision by AT&T to reduce equipment purchases due to a faster-than-expected decline in long-distance prices.

However, Economides said, the downturn will be mitigated by the increasing demand for high-bandwidth connections, for interactive services that require a high quality of service (QoS), and the breakup of AT&T, which will spur spending by the company’s four individual units. Economides said the recession would be “deep, but short.”

The survey, part of a promotional effort by Marconi to showcase its renewed efforts in the U.S., was discussed by a panel of experts Tuesday in Atlanta. The survey polled 203 “decision makers”—112 of them at enterprise companies and 91 at service providers.

During the panel, John Mayo, CEO-designate of Marconi, took the time to quash a rumor that Marconi was the object of acquisition interest by Cisco Systems. The report originally surfaced in Britain’s Sunday Business newspaper.

Mayo said he could understand why Cisco might be interested in Marconi’s technology, but that it would not benefit Marconi to work for “the archetypal box seller.”
Vince Ryan is Business Editor for Telephony. He can be reached at vryan@intertec.com.