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Summary:

YouTube, iTunes, MySpace…. whatever the consumer web service might be – are all beneficiaries of the easy availability of always-on, broadband connections. At the end of 2006, globally there were 281 million broadband subscribers, and that number is likely to grow higher. This broadband boomlet has […]

YouTube, iTunes, MySpace…. whatever the consumer web service might be – are all beneficiaries of the easy availability of always-on, broadband connections. At the end of 2006, globally there were 281 million broadband subscribers, and that number is likely to grow higher.

This broadband boomlet has pulled the telecom industry out of its slump, and now we are beginning to see signs that even hardware makers – some, not all – are beginning to show gains. North American service providers – phone companies and cable operators – had capital expenditure of $68.6 billion in 2006 up 8%, according to Infonetics Research, a Campbell, Calif.-based research group. The entire ecosystem – from optical component makers to router vendors to cellular gear makers have seen an increase in their revenues.

Infonetics’ analyst Stéphane Téral believes that this investment cycle is going to continue because everyone-is-in-everyone-else’s business. Cable companies selling phone service, and phone companies selling television service. This mash-up of media, Internet, telecom and traditional IT is going to keep the spending going at least through 2010 when it is likely to hit $76.7 billion.

The big spenders are AT&T, Sprint-Nextel and Verizon – accounting for nearly 61% of the total spending. It is still not clear if all this spending is going to pay off. From 2006-to-2010, the North American capital expenditures will be $369.6 billion.

Update: Broadband Reports points to another report that says telecoms are not spending as much, and 2007 will see a nominal increase, to about $41 billion, mostly because of increase in the IPTV-related spending. The data doesn’t include cable companies and is  phone-company related spending only.

  1. Our industry is also being affected in a very positive way.

    Continuous Security surveillance is now more affordable and is being enjoyed by Homeowners, SOHOs, SMBs regardless of where they are at in the world that has a wireless or internet connection.

    Even receive alerts on palm type devices when a atypical occurrence happens.

    Another industry that will fare well is the Software as service industry and online collarberation.

    This will allow many small businesses and home businesses to purchase only what they need and access it and collaberate via the Internet without the need for WANS or Intranets or VPNs enjoyed by the larger organizations

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  2. Om,

    I totally agree with you that “everyone-is-in-everyone-else’s business”. It has become the driving force behind our economy because the competition is so FIERCE that there is always a strong pressure on these big players to keep service/quality high and price low.
    Darn, I love Free Markets!

    Congratulations on launching Found Read! Looks very promising.

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  3. No traditional cable companies mentioned in your post? I assume this must be baby bell catch up time in the broadband arena. It seems like they have been catching up for the past 6 years. They squandered tons of money in DSL with little to show for it.

    Companies like Comcast continue to improve on the aspects of service that matter to customers. And the numbers show it, Comcast has penetration to less than 30% of homes in the US yet their subscriber counts for broadband are only 30% less than the baby bells combined.

    http://www.isp-planet.com/research/rankings/usa.html

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  4. Thanks PG, lets see if people actually come back and like the new site in a month from now. Back on the broadband side of things, it is interesting to see how little the revenue growth is in the US – about 3% across the board for all service providers which doesn’t seem like very much. I guess it is an issue they will all deal with for a long time.

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  5. Chris,

    this does include the MSOs, though as I said the bulk of spending is coming from three large phone operators.

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  6. Enormous amounts of money, any which way you look at it. Now compare this to Google en Microsoft’s stack of money and see how the big G and M are dwarfed. The lowes amount of spending is 41 billion USD for just the phone boys. Compare this to the estimated amount of cash available to Google and Microsoft (about 40 billion)

    If one compares Googles turnover to the amount of broadband users one gets interesting numbers. 281 million users worldwide and 10 billion in turnover makes $2.90 per user per month.

    It does give a very interesting view on the Net Neutrality debate. Google’s added value is less then 2.90 dollars per month ($35/user/year). So “the guys” may be making alot of money over the network of AT&T. But if you actually take a good look at it, this isn’t going to raise Big Ed’s bonus by much.

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  7. Jesse Kopelman Monday, April 16, 2007

    Raindeer, sure Google/YouTube, MySpace, Yahoo!, and countless others only add a little bit of value each, but when you add it all up there is not much left out of the $30-$50/month most pay for broadband. The Verizon’s and Comcast’s of the world may eventually replicate the services people want on-network, but in the meantime it is the YouTube’s and iTunes (and illicit P2P networks) that are driving demand for broadband. In a world controlled by Ed Whittacre, we’d all still be on dial-up because anything requiring broadband would be a separately billed cable-TV style service. The Internet made Broadband, not the other way around.

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