Infocomm Networks: Markets by Traffic Type and Technology

Report Highlights

• Spending on electronic information-communication networks accounted for a total of $504.13 billion in 2000. With strong continued projected 2000-2005 growth of 22% AAGR, led especially by the growth of data, financial and video networks, we project revenues for the sector as a whole to reach $1.39 trillion in 2005.
• Voice Networks, the oldest form of networking technology, a category which includes traditional public switched telephone networks and private leased lines, as well as wireless, voice over IP and satellite, will continue, as currently, to generate the most revenue of any single category, with projected 2005 expenditures totalling $469.42 billion. This is over 33.7% of all projected info-communication spending by businesses and consumers.
• Financial transaction networks, including financial EDI, electronic funds transfer, online and Internet financial service and e-commerce systems, will grow at a projected clip of 30.3%, reaching a 2005 expenditure level of $209.915 billion. This will be 15% of all info-comm spending, up from a level of just 11% for the category in 2000.

INTRODUCTION

OBJECTIVES

"In a few years," pioneer computer scientist J.C. Licklider wrote prophetically in 1968, "men will be able to communicate more effectively through machines than face to face." When Licklider made that statement, the word "network" in its current sense was barely recognizable outside specialized technical circles. Networks, in common usage, referred to the three major national television and radio networks. Only a handful of very large companies and research institutes had computers capable of communicating with each other, over very expensive leased lines. Banks operated only during "banker's hours" and telephone service for most of the middle class was primarily local, with long distance a relative luxury.

Advances in voice, data, video and financial networks in the ensuing thirty-two years, however, have given a common-sense basis to Licklider's audacious vision. While few would argue that electronic information and communication networks are a replacement for face-to-face communication, it's become clear to all that networks have utterly transformed practically every aspect of daily personal and life. Exchange of voice communication, data, financial transactions and visual information across distant regions and nations is, for an increasing portion of the population, as immediately and readily accessible as conversation on a street corner, hand delivery of a document or a visit to a shop in one's home location.

Use of the telephone, the oldest electronic networking technology, has been revolutionized by the dramatic increase in long-distance capacity afforded by fiber optics and the development of wireless technologies that enabled the mass marketing of mobile phones. The first transatlantic fiber optic cable laid in 1988, for instance, had a capacity to carry about 40,000 conversations. Current fiber optic technology can carry up to several million conversations in a single strand of fiber. The average price of a three-minute calling connection between New York and London has fallen from over ten dollars in 1970 to under a dollar. These changes in tandem have dramatically reduced the price of long-distance and international calls, thus expanding both voice and data traffic, leading to a profusion of enhanced services, such as calling card, call forwarding and 800 numbers.

Almost unknown to es and consumers twenty years ago, mobile telephones are now used by nearly one-quarter of the world's one-billion-plus telephone subscribers. This in turn has opened up huge markets for pagers and mobile data, as well as voice communications and enhanced personal communications services that employ features of personal computers. The analogue broadcast model of television which held sway through the 1970s has, through the expansion of communications satellite technology and digital television, drastically expanded both the reach and the range of television, offering more channel capacity, new delivery systems and enhanced possibilities of two-way interactive visual communications for specialized and consumer products and applications.

At the heart of the new convergence is the newest of the communications technologies, the electronic computer, which has continued for three decades to evolve exponentially, leading to the miniaturization of computers from several-ton mainframes to desktop computers to powerful handheld devices of just a few pounds. The intercommunication and networking of computers made feasible through distributed packet switching technology now links tens, very soon to be hundreds, of millions of individual computers and local area networks, creating a panoply of possibilities for services and applications.

Though telecom, television, computer and financial service institutions have pioneered the new convergent worldwide voice, data, financial and video networks, and stand to exploit huge burgeoning markets created and served by them, the information-communication (IC) revolution has been no less disruptive of their traditional industries, structures and models than it has of the daily experience of its users. All of these industries are by necessity reinventing themselves, and in the transition new boundaries between a wide variety of enterprises, such as telephone, computers, software, networking, and media, are being negotiated.

This report will explore the patterns of this quickly evolving sector, by exploring the recent dynamics and trends of the different user markets served by new info-communication networks. It will delineate the most important developments in electronic information and communication technologies over the past few decades. These will include voice networks, (public switched, private leased line, wireless, voice over IP), data networks (the Internet, LANS, WANS, wireless messaging), financial networks (EDI, e-commerce, electronic funds transfer) and video networks(cable, satellite, and the Internet).

It will also examine the near and larger term commercial opportunities and challenges of a number of emerging technologies, products and applications in each of these areas. Through the study of historic patterns, new technological innovations and the perspectives of key industry insiders, forecasts and projections are made of user markets, network traffic and expenditures through the year 2004.

Among the key concerns of this report will be:
1) exploring the major end-user markets for information-communications networks,
2) examining the key patterns of network user traffic and
3) analyzing the key potential areas for revenue growth for information-communication products and applications.

REASONS FOR REPORT

The info-communications networking industry has through its brief but tumultuous history been a fertile meeting ground for different companies and industry sub-sectors. Each is expert at some aspect of the technology. All, however, are essentially new to the industry now being formed by the convergence of heretofore-disparate technologies and media. This report is designed for marketers from each of these areas. By focusing on emerging usage patterns of information-communication networks by and individual consumers, it will help marketers from industries traditionally geared toward specific forms of information and/or communications networks, be they voice, data, financial or video. It will also provide them a wider framework of understanding new user market dynamics and demand in a radically new convergent environment.

CONTRIBUTIONS

This study delineates the most important developments in electronic informational and communications technologies over the past several years, tracing their history, as well as reporting on the current state of the art. It examines the near-term commercial opportunities and challenges of a number of different technologies and products. Through the study of historic patterns, new or impending technological breakthroughs and extensive dialogs with key industry insiders, institutional forecasts are made of dominant user markets, traffic patterns and expenditure trends projected from 2000 through the year 2005.

SCOPE

This BCC report includes all aspects of information-communications networking usage, including voice, data, video and financial transaction networks, taking into account historic and emergent and consumer usage trends, market demographics, government regulatory environments, expenditures on technology, products and applications. We project critical trends likely to shape the near future, based on a thorough historical overview and detailed analysis of the present.

METHODOLOGY AND SOURCES

Preparation of this report involved in-depth study and critical analysis of published data from a wide variety of government and private sources. Industry projections have been made by BCC based on original studies of economic, social and demographic trends, as well as on critical examination of projections based on industry analysts and those found in public sources.