The Changing Domestic Telecommunications

Report Highlights

• Telecommunications equipment and services will account for $448.7 billion in revenue in 1999, increasing yearly to $698.9 billion by 2004. Although equipment revenues will average a higher growth rate than services (12.2% vs. 7.86%), services will continue to account for the majority of telecommunications revenues.
• Revenues will increase to $532.0 billion in 2001, and continue to increase, reaching $578.4 billion in 2002. Service offerings still in their infancy in 1999 will begin to mature in 2002, widening their marketplace exposure and customer acceptance. Businesses, whose IT budgets were overwhelmed with Y2K preparatory work, will recover and begin investing in upgrades and improvements in regular cycles.
• Revenues will reach $629.6 billion in 2003 and $698.9 billion in 2004. Services will continue to account for most of this revenue. Service offerings will perform a delicate balancing act during 2003 and 2004. Service providers will seek to increase monthly revenues from a maturing market, while on the other hand, keep minimum monthly fees low enough to appeal to the largest group of customers. The number of companies in the services market will begin to diminish, as mergers and acquisitions start a more vigorous cycle. Equipment revenues will grow in these two years, but their rate of growth will slow. By the end of 2003-2004, infrastructure improvements will be completed. Many companies that began projects will be bought or merged with other companies, altering or stopping some of these efforts.

INTRODUCTION

STUDY GOALS AND OBJECTIVES

The domestic telecommunications market is growing rapidly. Growth has come chiefly through new services, especially those which combine aspects of the telecommunications, cable television, broadcast television, computer, Internet and utility industries. The objective of this study is to analyze the various industry trends and the most successful prospects for the next 5 years. Since preliminary research indicates the most activity will be in services, this segment of the market is the main focus of this report. While equipment revenue is summarized, it is not discussed in detail.

REASONS FOR DOING THIS STUDY

In 1984, AT&T, the monopoly telecommunications company in the United States, was forced to divest its Bell Operating Companies (BOCs) and compete with other companies for customers of its long distance services. This marked the beginning of a growth period in telecommunications. Cable regulation changes in 1992 were followed by the launch of satellite television in 1994. This increased high-technology options available to the average American household. By the mid-1990s, continued growth was further fueled by the explosion of Internet usage, increasing reliance on wireless services and the overlapping of the telecommunications, cable and computing industries. This was better known as convergence. The Telecommunications Act of 1996 further deregulated telecommunications by opening up local access service to competition.

The combined forces of telecommunications deregulation, i.e., explosive Internet usage and technological advances in related sectors, have brought about products and services which were considered at best, a "some day" possibility. Technological change has spurred social changes as well, which, in turn, drive demand for more technological solutions. Home-based small es and telecommuting have become commonplace, spurring demand for home networks, high-speed data connections and "smart home" services.

In spite of continued growth, however, telecommunications providers also have encountered regulatory, competitive and cultural challenges. New competitive challenges have emerged, as many companies that had been categorized as computer companies, utility companies or cable companies, are now considered part of the telecommunications industry. Regulators seem unable to keep up with the pace of change, and frequently prefer to let the market rule itself unless there are overriding antitrust or social policy concerns. Meanwhile, the American public is increasingly concerned with social issues that directly touch this fast-paced industry, including privacy and environmental issues. Both industry and consumers also are seeking ways to provide telecommunications access to as many Americans as possible, as the direct link between financial/career opportunities and technology becomes stronger.

METHODOLOGY

The forecasts in this study are reached through several different approaches. Projected percentage growth, estimated revenue increases and historical data are all carefully studied, and the projections contained herein are a result of reconciling these three data flows. Since some technologies and industries may overlap or compete for the same customer base, not all projections are necessarily positive. Other tables show positive growth throughout, but this growth will be at the expense of either individual company revenues within the sector, and/or sectors of industries not covered by this report.

SCOPE AND FORMAT

The scope of this report is to describe the current telecommunications services market in the United States, and to discuss the trends that will shape this market over the next 5 years.

This study is divided into four major parts:

1.    an introduction, overview and reference to similar BCC reports and services,

2.    a discussion of market size and market segmentation,

3.    a discussion of issues which will directly impact the telecommunications industry over the next 5 years, and how telecommunications providers can optimize their chances of success in the market and

4.    Profiles of 20 companies in the domestic telecommunications industry, discussing their current status, product and service offerings and future plans.  These companies are profiled as an example that highlights the growth and challenges discussed earlier in the report. Other tele-communications companies are listed after these profiles, giving the company name, location and pertinent facts about the company’s role in the telecommunications market.

CONTRIBUTIONS OF THE STUDY AND FOR WHOM

This study is aimed towards telecommunications service providers of all sizes and in all sectors of the industry, including those companies that identify themselves as computer, cable, Internet, e-commerce and/or utility companies. It also provides valuable information for end users of these services. To that end, this is a useful study for any executive decision-maker (private or public), as well as community groups concerned about market forces in telecommunications and their impact on society.

INFORMATION SOURCES

Information was gained through corporate Web sites and information packages, press releases, trade press information, FCC and other government reporting, standards bodies and trade groups, interviews with industry participants and third-party information sources.