TELECOM: BACK FROM THE DEAD
[SOURCE: BusinessWeek, AUTHOR: Spencer Ante]
All those YouTube videos and MySpace pages zipping back and forth on the Net
have revived the telecom industry -- and charged up the economy. Over the past
year the telecom industry has roared back to life. Credit a steady rise in
appetite for broadband Internet connections, which enable easy consumption of
watch-my-cat video clips, iPod music files, and such Web-inspired services as
free Internet phoning. Indeed, this year broadband adoption among U.S. adults
is expected to cross the important threshold of 50%. Capital spending is on the
rise as companies invest to build high-speed networks. Private equity players
are placing enormous bets on the industry, such as the $8.2 billion that Silver
Lake Partners and the Texas Pacific Group agreed to pay for networking
gearmaker Avaya on June 5. And the glut in broadband communications capacity is
all but gone. About half of the Internet's transmission capacity was going
unused in 2002. Today that pipeline has almost doubled in size, and yet the
unused portion is down to about 30%. As a result, the price that companies pay
for bandwidth in some parts of the U.S. is on the rise after six years of
declines. "All of us are planning expansions of our backbones in order to
support growth in Internet applications and video," says Dan Yost, executive
vice-president for product at Denver-based communications provider Qwest.
Perhaps the best indicator of the telecom revival is this startling data point:
Profits for the industry this year are expected to reach an all-time high of
$72 billion, topping for the first time the high-water mark of $65 billion in
1998.
http://www.businessweek.com/magazine/content/07_26/b4040001.htm?campaign_id=rss_tech
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