Large enterprises will spend $38 bln on wireline telecom in 2004

Data connectivity, particularly on the fixed-line, is the largest part of enterprise telecom expenditures. In-Stat/MDR estimates that these firms (with 1,000 or more employees) will spend $38 billion on wireline data services in 2004, roughly a 15% increase from 2003 estimates. The powerful growth of this category of expenditures is expected to be driven by strong adoption of new classes of data access, such as broadband (for at-home workers and remote sites), IP-based services, including voice, and a variety of managed network-based services, such as VPNs and managed network security services (from a telecom provider, e.g. AT&T’s Internet Protect services). While these new classes of services are expected to grow quickly, core wireline data services, like private line, shared Internet access and frame relay are expected to stagnate, as opposed to dropping dramatically.

As a result, spending in this category will grow quickly, with enterprise firms expected to spend $55.9 billion on wireline data services, a 10% average year-to-year increase. As usual, the largest percentage, 61% of the total or $23 billion, of enterprise wireline data services spending comes from the largest firms (10,000 or more employees) in this market. However, very similar to overall telecom spending trends in this market, growth in this sub-segment’s wireline data expenditures is expected to dip downward dramatically in 2006 and slowly increase thereafter. Consolidation will be the primary factor to this decline in spending growth.