Electronic Design

FCC Inaction Scuttles Turnaround For Wired Communications

Signs began to appear at the end of 2002 that the great hibernating wired-communications equipment bear may have started to awaken. But a recent decision by the Federal Communications Commission (FCC) may squelch a strong revival in 2003.

After two consecutive years of 20% or more declines in wired communications, iSuppli Corp. is forecasting a flat to marginally up year for 2003, with the overall wired-communications market expected to rise by 3.4%. The carrier market, the largest segment in wired communications, is expected to rise by 3%, while the second largest segment, enterprise networking, should increase by 4%.

For the four-year period from 2004 through 2007, iSuppli is projecting a modest 6% annual compounded growth in the wired communications market (See Figure). There are no indications on the horizon of a rebound to the strong growth patterns of 1999 and 2000.

New technologies, new applications, and the need for competitive environments drove a promise of better times ahead for the carrier market late last year. Further hope was spurred by the anticipation that the FCC would revise its policies to favor incumbent local exchange carriers (ILECs). Last February, the commission concluded its 14-month Triennial Review of competition rules with multiple rulings that made an impact on the telecommunications industry. Absent from the rulings was the move that iSuppli and many others in the industry had hoped for: the dropping of the requirement that ILECs provide their competitors unbundled access to their copper loops, copper subloops, and switching–the so-called "unbundled access" edict.

If ILECs were no longer required to share access to the copper loops, they would be more likely to take a new look at the deployment of broadband to the home, thus buying equipment and helping the wired communications industry to recover faster, iSuppli believes.

However, the FCC’s inaction means that unbundled access will be required for at least another three-and-a-half years. Add to this the growing global economic weakness and a slowing of the industry’s growth rate in China, and much hope for a vigorous turnaround in 2003 has vanished. Instead, iSuppli sees an increased likelihood of a slight decrease in wired communications equipment revenue in 2003.

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