IP: Comment on telecom downturn

[David Farber <dave () farber net>]

Dr Feng is right in the middle of the Richardson  Tele-corridor and is VP 
Research at UT Dallas.

Dave


> From: "Feng, Da" <fengd () utdallas edu>
>
> Dave
>
> The following should be self-evident.  I forwarded your message to the
> community in the Telecom Corridor in the Dallas/Fort Worth region and
> the following are some of the interesting comments.  You may want to
> show your folks in your distribution list.
>
> Da Hsuan
>
>
> From: Dewayne Hendricks <dewayne () warpspeed com>
>
> Telecom Markets Growing Despite Recession, Report Says
>
> Despite the current economic downturn, worldwide telecommunications
> market revenue should reach $1.4 trillion in 2001, an 8 percent increase
> from 2000 revenue, according to a new report from Gartner Dataquest.
> This market will continue to grow in 2002, with Dataquest projecting
> revenues of $1.5 trillion. The telecom services segment seems to be the
> sector least susceptible to economic uncertainty, with the worldwide
> telecom services market forecast to see its revenues surpass $ 1
> trillion in 2001, a 13 percent increase from 2000. For more...
>
> <http://article.ElectronicNews.com/UM/T.ASP?A5.11.1591.5.1820698782>
>
>
> ---------------------------------------------
> Da Hsuan,
> This is positive news.  However, the report also suggests that the
> infrastructure market will be down 4%.  Our business base is weighted on
> the equipment side which is where we have seen a significant impact.  I
> believe that the growing demand for data will bring us out but is not a
> quick fix.
> Thanks,
>
>
> -------------------------------------------
> Da Hsuan:
> The article is not a surprise. Why? In some markets where the number of
> land line phones is low (Africa--2 lines per 100 inhabitants, Asia
> --6.7, Mexico 9.6 [from ITU]), there is very strong demand and growth is
> not a surprise. Wireless is an appealing entree.
>
> What many don't realize is that a little over 2% of the fiber optic
> cable in the ground in the USA is being utilized. This tremendous excess
> capacity is probably one immediate cause of the downturn in our local
> economy, but also an optimistic measure of growth to come!
>
> -------------------------------------------------------------
> While this may be a gross over simplification, I believe that you can
> boil a large part of it down to Voice vs Data.
>
> Voice services in general are much more profitable, and have kept a
> solid demand and growth profile. Also, there has not been a large over
> capacity build out in voice as there has been in long haul broadband
> data services.  One area where we have taken a hit locally is in the
> demand for wireless voice hardware. While the services side demand for
> wireless voice is strong, there was over capacity on the equipment
> (handset) side.  This will probably abate soon, with moderated growth
> rates.  Most of the telecom business we have in North Texas has been
> supporting the tremendous growth expected in data/broadband services.
> Data is only a part of the total telecom market, and has had a very
> difficult time forecasting demand, and providing high quality services
> to it's customers (residential and small business). There was a build up
> for an expected demand that did not materialize. This growth was fueled
> not so much by profits from customer revenues as from the investment
> side that was anticipating large growth and large returns. Not sure when
> this will recover.
>
> Basically, we have been strong in the niche markets that have taken the
> largest downturns.
>
> ----------------------------------------------------
> It doesn't jive with our region from what I've heard.  I've spoken with
> executives at Verizon about their predictions for next year.  Verizon
> has predicted a flat revenue model.  They anticipate lower sales, but
> with decreased costs, they believe that their net profit will remain the
> same as 2001.

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