Traffic Jam Could Lift Telecom

Internet traffic will nearly double annually over the next five years, a spike that could push carriers to invest in network equipment again, IDC says.

by Colin C. Haley of boston.internet.com [March 3, 2003]

A new study from IT researcher IDC holds some welcome conclusions for long-suffering telecommunications equipment vendors.

According to the Framingham, Mass. firm, Internet traffic will nearly double annually over the next five years. Volume generated by end users is expected to jump from 180 petabits per day in 2002 to 5,175 petabits per day by the end of 2007.

By way of perspective, the Library of Congress' printed collection amounts to only 10 terabytes of information. By 2007, IDC expects Internet users will access, download, and share the information equivalent of the Library of Congress more than 64,000 times over, every day.

The jump will be largely due to exisiting Internet users upgrading to broadband connections (DSL, cable modem, satellite), IDC said. The wider pipes handle more data and rich content, such as music and video, than dial-up connections.

"Some industry observers have speculated that slowing growth in Internet traffic is at the root of the current telecom malaise, but IDC research shows that not only is Internet traffic growth strong, but it will continue at near triple-digit rates," said Sterling Perrin, an IDC analyst.

This bodes well for telecom gear suppliers, in general, and optical companies in particular, Perrin said. The subsector has been hard hit. In the late 1990s, investors funneled billions of dollars (through VC funds and IPOs) into companies developing technology for new optical networking systems to speed data transmission.

But when the economy soured, carriers slashed capital budgets and sector players faced a market clogged with advanced, but expensive, gear and no buyers. A slew of highly touted startups folded while larger players, including Corning, Nortel and Sycamore curtailed plans for hiring, plant expansions and product lines.

"As long as the total amount of voice and data traffic on the network continues to increase, then the need will arise for carriers to buy equipment, such as next-generation optical," Perrin said.

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