Biz Week: AT&T layoffs start telecom downturn

As if we didn't have enough bad news to worry about, Business Week asserts that cutbacks in consumer spending means that telecommunications service providers will have to do the same, causing a ripple effect that will impact equipment makers as well. We're not so sure to blame it all on the economy.

AT&T is used as the poster child for this theory, since the company has said it might cut back on the amount of network upgrades next year as it cuts 12,000 jobs - about 4 percent of its current work force. Verizon cut 2,700 people in the third quarter and Sprint has cut 4,000.

Before we ride the doom parade, we'd like to point out two factors: 1) Sprint has been a wounded duck for quite a while. 2) Just how much of these cuts can be attributed to the rapidly declining landline businesses of AT&T and Verizon is not really clear. But poor economic news makes for good cover. (Hard-core economics wonks may remember that the airline industry was bleeding money back around 2000-2001 and 9/11 provided the final straw/trigger).

Analysts are lining up to predict that more staff reductions and capital spending cuts are on the way, so equipment makers may see issues down the road.  With people economizing by dumping landlines and even web connections, less seems to be more, but-

At the same time people are trimming, they are buying new wireless services (cheers from our sister pubs in the FierceWireless division). According to ComScore, the fastest growing segment of buyers for the Apple iPhone is people who earn less than $50,000 a year. Biz Week concludes this is because of belt-tightening; we would argue that this is the Millennial just-out-of-college/landlines-are-so-unhip crowd buying iPhones because they're never going to touch a wired phone if they can help it.

Predictions for growth next year are minimal at best, and there's a suggestion that even the cash-cow wireless service providers may need to cut prices in order in order to retain customers. Wireless ARPU has risen for 9 out of 10 years over the past decade.

Needless to say, capital spending on equipment is being predicted to drop anywhere from 10 to 20 percent just at AT&T alone, so suffering is predicted for everyone from Cisco and Juniper, to already-suffering Nortel and Alcatel-Lucent.

For more:
- Business Week speculates on the impact of a slowing economy upon telecom. Article.

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