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Wi-Fi Technologies And Introduction Of New Applications To Drive Growth Of Wireless Communications Services Market

[January 29, 2004]

Wi-Fi Technologies And Introduction Of New Applications To Drive Growth Of Wireless Communications Services Market

Total spending in the United States on wireless communications will grow in 2004 by 7.6 percent, achieving a total of $144.7 billion, according to the newly released TIA's 2004 Telecommunications Market Review and Forecast, an annual publication of the Telecommunications Industry Association (TIA). The report predicts the wireless market will reach $190.8 billion by 2007, with a 9.1 percent compound annual growth rate from 2004 to 2007.

The U.S. wireless market consists of transport services, handsets, infrastructure including Wireless Fidelity (Wi-Fi®) equipment and professional services in support of the wireless infrastructure. Spending in 2003 totaled $134.5 billion, up 7.9 percent from 2002. Continued double-digit growth in transport services and an increase in handset and support services spending offset an 8.4 percent decrease in wireless equipment. The 2003 performance represents the first single-digit gain in the wireless market following years of double-digit growth, indicating that the market is approaching maturity.

The study predicts that the U.S. wireless subscriber base (wireless telephony and paging) will continue to expand, but at single-digit instead of double-digit rates. By 2007, there will be an estimated 195.5 million wireless communications subscribers, up from a predicted 168.3 million in 2004.

As subscriber growth rate diminishes, new applications, such as wireless Internet access, text messaging, instant messaging, ring tones, wireless games, multimedia messaging services and Wi-Fi technologies, will drive the market. Spending on wireless communications services is expected to rise by 10.5 percent in 2004 reaching $98.7 billion, and to expand at a 10.7 percent compound annual rate reaching an estimated $134.0 billion in 2007.

Wireless handset spending by end users is expected to grow faster in the coming years, fueled by accelerated replacement sales of more sophisticated handsets. Spending on wireless communications handsets will reach an estimated $10.2 billion in 2004, an increase of 6.6 percent over 2003. The overall handset market will increase from $10.2 billion in 2004 to $13.2 billion in 2007, growing at an 8.3 percent compound annual rate.

'With the introduction of new applications such as Wi-Fi technologies and more sophisticated communications products, we'll see an increase in carrier revenues.

The initial rollout of 2.5G technologies enabled carriers to offer enhanced wireless data services. We are now seeing the start of nationwide deployment of 3G applications with claims of average user speeds of 300-500 kbps. Prices associated with these new applications and service plans with more minutes will boost spending on wireless communications services,' stated TIA President Matthew J. Flanigan.

Other highpoints of this year's report include:

• Wi-Fi technologies represent a small but rapidly growing component of the wireless communications services. Spending on Wi-Fi services is expected to increase from $48 million in 2004 to $270 million in 2007. The availability of free Wi-Fi services and the use of the technology as a promotion for other services or bundled with other services will limit the potential for Wi-Fi as a stand-alone revenue generator. Nevertheless, Wi-Fi applications, growing at a 17.4 percent compound annual growth rate, are propelling the equipment market.

• Overall wireless equipment spending is projected to increase from $21.7 billion in 2004 to $26.3 billion in 2007, growing at a 4.4 percent compound annual rate.

• Spending on services in support of the wireless infrastructure such as basic services and support (field maintenance and repair, for example), professional services and depot repair and logistics, rose by 4.7 percent in 2003, down from the increases of more than 25 percent in prior years. The slowdown reflected lower capital expenditures in 2003 and the fact that the wireless network is largely in place. With the introduction of 2.5G and 3G technologies, spending will increase to a projected $17.3 billion by 2007, up 6.4 percent on a compound annual basis from the anticipated $14.2 billion in 2004.

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