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18 July 2024

US telecom growth seen slower than global industry

By Agencies

The US telecommunications industry will grow at a slower rate than the global industry in the coming years as the wireless and wired markets mature, the Telecommunications Industry Association (Tia) said on Friday.


According to a study commissioned by the Tia, the US telecom industry will grow at an average annual rate of 7.2 per cent in the period 2008-2011, reaching $1.3 trillion (Dh4.77 trillion) in 2011, compared with an average rate of 10 per cent, reaching $3.6 trillion (Dh13.2 trillion), for the rest of the world.


Growth in the US industry will accelerate to 9.3 per cent in 2008 from 8.3 per cent in 2007, partly due to spending on network upgrades and a government spectrum auction. Growth is expected to moderate in the following years, the report said.


"License fees associated with the 700 MHz auction will boost revenue in 2008, and the absence of that revenue will lead to a sharp drop in 2009," it said.


The biggest US telephone companies are Verizon Communications Inc and AT&T Inc.


While the authors of the study said industry growth could slow in an economic downturn, particularly if enterprise customers cut spending, they did not assume a severe economic impact on the telecom sector in their forecasts.


"In contrast with 2000 and 2001, telecom is not at the heart of the downturn," said Arthur Gruen of Wilkofsky Gruen Associates, which conducted the study.


Gruen, in a conference call with reporters, also said that while telecom is not immune, he is "not expecting a meltdown or anywhere near that."


He noted that even though the US economic outlook has worsened since the research for the study was carried out in the fall and summer of 2007, enterprises have not shown any signs of slowing down spending on installing new phone systems. 


The study expects the strongest 2008-2011 growth in the Asia-Pacific region, with a 13 per cent annual advance, followed by 11.1 per cent for the Middle East and Africa and 10.5 per cent for Latin America.


European growth will be just ahead of the United States at 7.5 per cent annually, while Canada is expected to be the slowest region with 5.4 per cent annually.


According to the study, about 35 per cent of US wireless service revenue will come from data services such as mobile Web surfing in 2011, up from 16 per cent in 2007.


With Web traffic for services such as Internet video soaring, the study found that in wired networks "current capacity will soon be unable to support bandwidth demand."


This is in contrast with the commonly held view in 2003 that "there would be excess network capacity for the foreseeable future." (Reuters)