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After years in the doldrums, telecom is back under sail. The outlook for telephone and cable-related companies is solid, with revenue expected to grow a robust 7.2% per year to $1.3 trillion through 2011.
What's providing the breeze that's lifting the industry's sales? Broadband. Internet traffic quadrupled last year as businesses and individuals made much wider use of video and other features that take up huge amounts of computer capacity. Five times as much data was transmitted over computer networks in one day in 2007 than during all of 1999.
"Beyond e-mail and e-commerce, we are now seeing a wide diversity of applications, from photography and music to video and social networking," says Charles Golvin of Forrester Research.
Barely available before the dot-com boom, high-speed Internet is now in more than half the nation's homes. Phone companies are offering high-speed fiber connections to homes, while cable companies are countering with beefed-up connections of their own. They're competing vigorously with $100-a-month package deals of Internet, phone and video. Suddenly, just six years after the huge glut of unused fiber-optic cable, there's a shortage of fiber again.
Wireless is another huge driver of growth. No longer used just for voice communications, mobile phones are becoming the device of choice for many people to text message, surf the Web, listen to music, play games and watch video.
"We are seeing a sea change in the industry," says Roger Entner of IAG Research. "Everything is going wireless. Only the heaviest of broadband lifting, such as TV and large-scale Internet applications, will be wired." Apple's iPhone, introduced last year, is seen as key to the future of mobile applications.
It's no wonder that the government received more than $19 billion in revenue from a recent auction of wireless spectrum being given up by TV stations in favor of high-definition TV airwaves. The big winners, Verizon and AT&T, will use their new space in the spectrum for more extensive cell phone and wireless Internet coverage. The expanded coverage will spur Google, Yahoo and other content providers to offer their search and Web shopping services to mobile phones.
Businesses are ramping up their telecommunications spending, too. More and more firms are turning to voice over Internet service to save on conventional telephone bills. To improve security, companies are also taking advantage of expanding closed, secure phone and Internet networks for linking corporate colleagues and customers. Even videoconferencing, which was slow to catch on, is turning a corner.
The telecom upturn means more money not only for the major telecom carriers but also for the companies that provide switches, chips and other infrastructure to the thriving service providers. The top three, Verizon, AT&T and Sprint Nextel, will spend more than $35 billion this year on upgrading both land and wireless networks.
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