Capex on the rise in 2010, analyst says

Telecom spending will grow 1.5% to $57.7 billion after falling in 2009, according to a research note this week from Avian Securities.

It’s important to note the context of the estimate. Avian analyst Catharine Trebnick primarily covers the IP vendor equipment market, but researched and interviews U.S. carriers to get a view of telco spending in 2010.

According to Avian, capex growth will be led by larger carriers including AT&T ($17.5 billion), Verizon ($16.6 billion), Comcast ($5 billion) and T-Mobile ($3.5 billion). Among the key drivers are spending on IP projects, including IP backhaul and IP at the network edge to support managed services to increasingly outsource-friendly small and medium businesses, Trebnick said in an interview.

“It’s not big, it’s pretty slight overall,” Trebnick said. “[A year ago], everybody was very cautious; now, you could say they are cautiously optimistic.”

One trend that could keep overall spending depressed is the move to IP itself, Trebnick said. “As network architectures are moving to be more flat and all IP, carriers don’t need as much equipment.”

Overall, Trebnick’s note predicted more attention to the IP network edge:

Our industry sources indicate the AT&T and Tier 2 operators’ focus will be on transition from TDM-to-IP (ATM/Frame) to IP-VPNs/Ethernet and increasing the number of IP interconnections at the edge of the network. We expect more managed services will be available as a result of the economic downturn in 2009 as there is an increase in the number of business and SMBs looking for IP VPNs, managed security, hosted VoIP solutions to maintain productivity and reduce overall operating costs. One data point we heard that businesses are using the Internet over the post office as a way to ship critical data.

One vendor benefiting from these trends will likely be Cisco. In particular, Trebnick predicted more operator deployment of IP video capabilities, with network deployment in 2010 followed by service deployment the next year.  Vendors strong in session border controllers, like Acme Packet and other competitors entering the space like Sonus, could also see solid demand.

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