In recent months, there has been an increasing trend of VoIP service providers bringing to market complete, managed solutions that free clients from the complexities of administrating a phone system. These solutions, sometimes also referred to as hosted VoIP, provide advanced and robust features at an affordable price and without the need to hire specialized IT staff.

 

In order to make these types of managed solutions available, VoIP service providers are investing in equipment and systems necessary to provide their clients with full-featured packages. This takes a significant amount of capital expenditures, a fact noted in one of Infonetics’ most recent reports, “Service Provider Capex, Opex, ARPU, and Subscribers, North America.”

 

Just how much are North American VoIP service providers and other carriers spending on capital expenditures? Infonetics put the figure at $68.6 during 2006, up 8 percent from 2005. The research and consultancy firm projected that this spending will increase 12 percent by 2010, to $76.7 billion.

 

The report additionally noted a strong mergers and acquisitions trend among telcos like Verizon, MCI, AT&T (News - Alert), BellSouth, and Cingular.

 

“The service provider landscape that has emerged in North America is dominated by two giant telcos, AT&T and Verizon, and a cluster of powerful cable MSOs such as Cox (News - Alert), Time Warner, and Comcast,” said Infonetics analyst Stéphane Téral, in a statement.

 

Téral continued: “As everyone is entering everyone else's turf (telcos are offering IPTV, cable MSOs are offering VoIP, for example), the convergence between information technology, media, Internet, and telecommunications is adding new competitive pressures that are driving this new investment cycle,”

 

Although M&A activity has created months of investment disruption, that hasn’t had much of a dampening effect on the capital expenditures of RBOCs, Canadian ILECs or cable MSOs, all of which increased their CAPEX during 2006, and will continue increasing it through 2009 as they undertake major projects, Infonetics said.

 

“The third year of the new investment cycle we identified previously is now starting, and is expected to plateau in 2009 or 2010,” said Téral.

 

All the investments being made are, of course, intended to help service providers increase revenues. To some extent, rewards are already being reaped; Infonetics said that combined revenue of all public North American carriers crept up 3 percent in 2006 to $403 billion.

 

Because many carriers are investing in mid-term projects, Infonetics predicted that CAPEX-to-revenue ratios will remain stable at about 17 percent through 2008; that number will drop to about 16 percent by 2010.

 

What types of projects are service providers investing in? Infonetics cited voice, mobile RAN and optical equipment as the top three investment areas.

To learn more about the VoIP service providers market, please visit Smoothstone’s VoIP Service Providers channel on TMCnet.com.

 

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