TIA study: Economic downturn won’t deter telecom

The TIA’s market forecast predicts increasing growth in telecom, with wireless leading the way.

According to the Telecommunications Industry Association’s “2008 Telecommunications Market Review and Forecast” for the global telecommunications industry, there has been a healthy uptake of telecom services, both at home and abroad, with international markets seeing more growth than domestic markets. The report, released today, found that despite an economic turndown, the market is now demand-driven, not supply-induced.

For the telecom market as a whole, the study, conducted by Wilkofsky Gruen Associates, found that worldwide revenue totaled $1 trillion in 2007, up 8.3% from the previous year. The global telecom industry is expected to grow to $4.9 trillion in 2011. Out of this, the United States will mature at an average annual rate of 7.2% from 2008 to 2011, reaching $1.3 trillion in 2011. The international markets are expected to surpass this with an average growth rate of 10%, reaching $3.6 trillion by 2011.

Arthur Gruen of Wilkofsky Gruen Associates, principal author of the forecast, said that on the domestic front, key drivers of the progress were explosive growth in network traffic and data applications in the wireless and landline space. The study found that about 35% of U.S. wireless service revenue will come from data services, primarily Web surfing and video in 2011, up from 16% in 2007.

“The action is on the data side,” he said. “Entertainment is a driver. Bandwidth consumption is just booming. It doubled in 2006 and quadrupled in 2007. Early in the decade, even as recently as 2002 and 2003, the belief was we had so much access capacity we wouldn’t have to invest in it for the foreseeable future. Well, the foreseeable future lasted less than a decade.”

As such, Gruen said that the industry might be running into bandwidth shortages resulting from video and peer-to-peer data sharing as well as the huge growth in data communications and applications. TIA president Grant Sieffert said the bandwidth boom presents a significant opportunity for the organization’s 600 member companies.

On the landline side of telephony, TIA expects subscriber erosion to continue but at a reduced rate going forward. The uptake of secondary lines in the 90s is reducing as teens and younger users are relying more on wireless phones and less on second landlines. Wireless service revenues will pass landline revenue in 2009, the report found.

Despite a struggling U.S. economy, Gruen said telcos are operating in a more vibrant economic space versus the economic recession of 2001. While economic growth may slow in 2008, the TIA is not expecting a meltdown to occur – a sentiment both AT&T and Verizon echoed in their fourth-quarter 2007 earnings reports.

“We see a lot of action occurring in the wireless space,” Gruen said. “The telecom industry is by no means immune to an economic downturn. We could see a bit of a pause in 2008 reflecting a downturn in the economy, particularly by enterprises who want to hold back or delay some of their investments. Nevertheless, the enterprises are focused on converting to IP, and a lot of the plans are already in place. We don’t expect them to delay that.”

“Services are amongst the last consumables affected by a slowdown, so we believe this growth will continue,” Sieffert added.