Service Providers See Growth in 2005
The majority of the 120 service provider respondents (58.7 percent) said they believe revenues will grow by more than 10 percent next year, with nearly a third of large carriers projecting double-digit growth.
The survey found that the highest revenue growth is expected to be in triple-play, Ethernet, and mobility services, with triple-play leading the way. Triple-play is defined as a mix of video, voice, and data services -- usually delivered via residential broadband connections. Areas targeted with the lowest growth rate include ATM and frame relay services, as providers move away from legacy networks into next-generation Ethernet and IP-based services.
Along with increased revenues, the survey found that carriers are planning to ramp up capital spending (capex) next year, with more than 75 percent of respondents saying that their companies will increase capex in 2005. Only 10.5 percent said that their company will restrict spending next year.
The survey found that VOIP services are expected to grab the lion’s share of spending, with more than 58.8 percent of all survey respondents saying their company would boost capex for voice by 10 percent or more next year. But the real growth is expected to come from smaller carriers which the survey found are planning to expand their VOIP purchases aggressively, with 50 percent of small service providers (5,000 employees or less) saying they would increase spending by 25 percent or more.
But even though providers are planning to spend on VOIP equipment, they’re not expecting to get a high rate of return on their investment right away. A little less than 36 percent of respondents expected to have an annual revenue per user (ARPU) of $20 or more from consumer VOIP in 2005, with only 28 percent of incumbent carriers even expecting to hit that number.
Broadband Internet access will continue its strong growth, with more than 60 percent of respondents expecting ARPU of more than $20 per month and 20 percent expecting ARPU of $40 per month.
Other potential revenue makers in ’05 include broadcast digital video and video-on-demand services. The results suggests that this growth is partially based on the belief among incumbent carriers that these are quickly becoming “must-have” services.
The study also looked at the deployment of Ethernet services and found that carriers will continue favoring point-to-point Ethernet, rather than multipoint Ethernet services over the short term. It also found that carriers, for the most part, appear to be limiting their deployment of Ethernet-based services that tie into legacy offerings beyond 2005.
Heavy Reading's 27-page report, “Ethernet Survey of Service Provider Revenue and Spending Expectations for 2005,” costs $2,495. For more information, please click here. — Chris Somerville, Senior Editor, Next-Generation Services