Spending Wave Buoys Makers of Network Gear

Bobby White (2.14.07)
http://online.wsj.com/article/SB117142538050108158.html?mod=technology_main_whats_news

New Web Services Spur Phone Firms to Invest In Increasing Capacity

Shows increased investment in not only increasing bandwidth capacity, but in alternative solutions to fix the seemingly never-ending demand for broadband. This article also supplies numbers about large telco investment in these technologies.

Companies from Australia's Telstra Corp. to AT&T Inc. are buying up new gear to upgrade the "plumbing" that carries voice and data traffic around the globe.

In recent weeks, Cisco Systems Inc. and Juniper Networks Inc. have posted annual sales growth of nearly 50%, among their strongest performances in years.

The good times look likely to continue for at least a while. Overall, North American telecom companies are projected to spend $70 billion on new infrastructure this year. While that's down from the $110 billion they shelled out during the boom year of 2000, it's up 67% from their 2003 total, according to industry tracker Infonetics Research.

World-wide, spending on new telecom infrastructure is expected to rise to $240 billion in 2008, up 19% from 2005. Moreover, a greater proportion of that spending is expected to be plowed into accommodating capacity-hogging Internet traffic like video

The new spending telecom providers have earmarked for boosting capacity accounts for a relatively small slice of their capital budgets. But it has provided a crucial boost to Silicon Valley networking companies like Redback. In 2003, Redback, San Jose, Calif., filed for bankruptcy protection. Then, in 2004, Redback introduced a new product called the Smartedge router, a device that helps deliver phone, Internet video and other services through a single "pipe."

Redback's Smartedge router was among the first of the new-style gear. It consolidated functions that control video services and customer management into one box. Juniper, among others, is set to roll out a similar device in coming months. BellSouth network officials who now work for AT&T say they haven't used the Smartedge router to prioritize data traffic, but instead for other capacity-increasing functions.