Recession Hurting Fixed Line Data Spending

Spending on wireline data has fallen for the first time in a decade as the recession makes its presence felt.

According to a report from market research firm In-Stat, spending on wireline data services by US businesses this year is falling across nearly every category, with the exception of IP VPN and Ethernet services.

Overall, In-Stat expects a nearly 2 percent decline in US business spending on wireline data services, which represents the first time this market has declined in the 10 years the company has been tracking it.

In-Stat found spending on wireline data services by US enterprises (1,000+ employees) is on track to decline from $23 billion (£13.7 billion) in 2008 to $22.4 billion (£13,3 billion) in 2009. That said, the research suggests spending will stabilise in 2010 before returning to growth reaching $25 billion (£14.8 billion) by 2012.

Spending on IP VPN services by US small businesses (5-99 employees) is projected to grow from about $100 million (£59 million) in 2008 to over $250 million (£148 million) in 2012. Among vertical segments of US enterprises, research showed government represents the largest segment. Additionally, spending on Ethernet services among healthcare firms will see some of the strongest growth, nearly tripling from 2008 to 2012.

The report, “US Business Spending by Size of Business and Vertical: Telecom – Wireline Data Services,” provides forecasts of US business telecom spending for the 2007 – 2013 period, with segmentation by product category, size of business and vertical market. Detail is included for the following wireline data services: ATM, frame relay, Internet access, private line, and the aforementioned IP VPN and Ethernet services.

Wireline data services include expenditures on wide area network (WAN) data transport services, as well as dedicated Internet access (which includes cable and DSL), network-based IP VPN, private line, frame relay, ATM and Ethernet services. The category does not include managed services, such as hosted IP telephony, LAN infrastructure, security and other managed solutions, which are tracked separately by In-Stat.

In-Stat analyst David Lemelin said Ethernet services and IP VPN services are among the lone bright spots in the market. “Spending on ATM, frame relay and private-line services is particularly weak, declining about nearly 10 percent from 2008,” he said. “Among the vertical business markets, the professional services and healthcare segments are faring best, but even these are only flat year to year.”

The company is offering the report, which includes forecasts broken down into four size-of-business segments (from small office/home office, or SOHO, to large enterprises) and 10 vertical markets, including transportation, retail trade, finance, insurance and manufacturing, for $15,000 (£8,911).