Service Provider Capex Spending To Hit $61 Billion This Year: Report

Service provider capital spending remained steady in 2004 and is poised for a slight increase in 2005, according to a new report from Infonetics Research. North American carrier revenues increased slightly in 2004 but are expected to hold steady in 2005. the report found.

According to the firm's biannual "Service Provider Capex Analysis, North America" report, carrier capital expenditures were $58 billion last year and are expected to increase 5% to $61 billion in 2005. Specifically, capital spending by regional Bells and Canadian carriers rose last year, and will again this year, with an emphasis on acquisitions of multiprotocol label switching (MPLS) equipment. Cable carriers reduced spending in the same period, but Infonetics expects it to rise slightly in 2005 as they, too invest in MPLS and voice routers.

"We saw some meaningful changes in the North American capex environment in 2004, with aggregate spending holding steady after three years of drastic cuts, and ILECs increasing their investments," Infonetics directing analyst Kevin Mitchell said in a statement. "Another noteworthy trend is how fast mobile subscribers are closing in on access lines, with mobile subscribers now at 90% of PSTN lines, up from 77% at the close of 2003. North American mobile subscribers grew 13% between 4Q03 and 4Q04, from 145 million to 164.3 million. We could easily see mobile overtake access lines in 2005."

Nevertheless, terrestrial networks growth remains healthy, with the number of digital subscriber line subscribers increasing 44% to 16.5 million between the thiord and fourth quarters of last year. In the same period, cable Internet use increased 27% to 21.4 million users.