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Telecom Services in Vertical Markets
2003-2008
a market research report
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Amid the fierce pricing competition, identifying lucrative vertical segments that are willing and able to pay is critical to survival. Vertical market segmentation pinpoints the telecom spending inclinations of various industries––it’s the key to any business plan, and a necessary ingredient for effective target marketing and sales force deployment.
In its annual review of vertical markets, Insight examines the spending patterns on local, long distance, ISP, and wireless for 14 classes of business including: healthcare, construction, retail trades, wholesale trades, educational services, financial, insurance, real estate, professional business services, hotels and lodging, transportation, communications, utilities, entertainment and media, durable manufacturing, and non-durable manufacturing. In quantitative terms, Insight describes the requirements of each vertical market and how likely they are to expand their telecommunications services over time. If you need to target markets for telecommunications services, then you should read this report.
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Report Excerpt
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Vertical Industry Telecommunications Spending
Telecom profit margins are rapidly deteriorating in the US market, in part, because carrier offerings are perceived as commodities. To dispel this belief and restore the telecommunications industry to sustainable growth, vendors will have to reach deeper into the US market, focusing on specific vertical industries and catering to their precise communications needs. Vertical opportunities will be calculated by:
Failure to respond to the business market’s demand for specialization will allow competitors to capture market share early on, relegating slow-starters to a residential/consumer focus.
Vertical markets, therefore, represent untapped opportunities for the telecommunications industry. The objective of this market research report is to examine and quantify these opportunities in various vertical industries for the telecommunications service provider community. INSIGHT examines 14 vertical markets in this report, segmented according to Standard Industrial Classification (SIC), a Bureau of Labor Statistics (BLS) division of economic data. These 14 vertical markets represent almost 78 percent of all workers and approximately 82 percent of the total number of establishments in the US.
Telecommunications products and services are, by their very nature, commodity products, since they exhibit little or no customization. Telecom providers recognize the commodity nature of their product when they market horizontally—offering everything to everyone, everywhere. Vertical marketing focuses on developing solutions to user problems within specific industries. In contrast, horizontal marketing provides generic “one-size-fits-all” offerings. In this market analysis report our thesis is that, with competition eating into already anemic profit margins, solution selling by vertical industry becomes an attractive way for telecommunications vendors to differentiate and a viable way to maintain profitability and sustained growth. Four principal growth factors affect telecommunications expenditures significantly.
With the US economy in such difficult straits, business opportunities for telecommunications providers in the enterprise market seem harder to find than ever before. According to the BLS, the employment picture is not sanguine. In April 2002, unemployment hit an eight-year high of 5.9 percent. The picture did not improve as the US rolled into 2003: by April, unemployment hit six percent, in May it rose to 6.1 percent, and by June the number peaked at 6.4 percent. Although the unemployment rate improved to 6.2 percent by July of 2003, some economists insisted that the rate only improved because a significant number people dropped out of the “actively looking for jobs” market, which is parcel to the overall unemployment calculation. On the other hand, the job market is usually the last fragment of the economic picture to recover in a turnaround—so stubborn unemployment numbers may not indicate a stagnant economy.
The economy will show concrete signs of improvement relatively soon due, in part, to the estimated $600 billion (over five percent of the gross domestic product) deficit providing a stimulus. For the second half of 2003, it is reasonable to expect a growth rate of 3.5 percent; more than double the growth rate in the first six months of 2003. Federal Reserve officials have cut interest rates 13 times since 2001, and cut their target for short-term interest rates in June to one percent; a 45 year low. Stimulus packages, deficits, tax cuts, and low interest rates are certain to drive the economy over the next five years.
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Executive Summary.
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Market Segmentation
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US Total Wireline Market
US Business vs. Residential Wireline Markets
US Business Expenditures in Vertical Markets
US Wireline Data vs. Voice Markets
US Wireline Data Expenditures in Vertical Markets
The Wireless Data Explosion
By Industry Sector:
- Healthcare
- Construction
- Retail trade
- Wholesale trade
- Educational services
- Financial, insurance, and real estate services
- Professional business services
- Hotel and lodging
- Transportation
- Communications
- Utilities
- Entertainment and media
- Durable manufacturing
- Non-durable manufacturing
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Table of Contents
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Chapter I
EXECUTIVE SUMMARY
1.1 Vertical Industry Telecommunications Spending
1.2 Telecommunications and Vertical Marketing
1.3 Telecommunications Expenditures by Vertical Industry
Chapter II
MARKET OVERVIEW
2.1 Classification Systems
2.2 Segmentation and Performance
2.2.1 Wholesale Trade
2.2.1.1 S&P Indices
2.2.2 Financial, Insurance, and Real Estate Services
2.2.2.1 S&P Indices
2.2.3 Professional Business Services
2.2.3.1 S&P Indices
2.2.4 Communications
2.2.4.1 S&P Indices
2.2.5 Durable Manufacturing
2.2.5.1 S&P Indices
2.2.6 Health Care
2.2.6.1 S&P Indices
2.2.7 Retail Trade
2.2.7.1 S&P Indices
2.3 Telecommunications Service Trends
2.4 Local Trends
2.4.1 Broadband Access Growth
2.4.2 Primary and Secondary Access Line Growth
2.4.2.1 Historical
2.4.2.2 Forecast
2.4.3 Private Line Growth
2.4.3.1 Historical
2.4.3.2 Forecast
2.5 Long Distance Trends
2.5.1 Historical
2.5.2 Forecast
2.6 Telecommunications Equipment Trends
Chapter III
DRIVERS AND EXPENDITURES
3.1 Drivers of Telecom Expenditures
3.1.1 Growth in Employment
3.1.2 Growth in Occupations
3.1.3 Size and Number of Establishments
3.1.4 Proliferation of Internet Access
3.2 Telecom Expenditures by Vertical Markets
3.2.1 Long Distance
3.2.2 Data Communications
3.2.2.1 Direct Dial
3.2.2.2 ISDN
3.2.2.3 DSL
3.2.2.4 T-1
3.2.2.5 T-3
3.2.2.6 800 lines
3.2.2.7 OC3
3.2.2.8 FDDI
Chapter IV
CASE STUDIES
4.1 Overview
4.2 IBM
4.2.1 Retail Trade
4.2.2 Retail Trade
4.3 EDS
4.3.1 Manufacturing
4.3.2 Energy, Utilities
4.4 Qwest
4.4.1 Federal Government
4.4.1 Insurance
4.5 Verizon
4.5.1 Health care
4.5.2 Insurance
4.5.2 Finance
4.6 AT&T
4.6.1 Manufacturing
4.6.2 Professional and Business Services
4.6.3 Manufacturing
4.6.4 Professional and Business Services
4.7 SBC
4.7.1 Finance
4.7.2 Education
4.8 BellSouth
4.9 Sprint
4.9.1 Professional Services
4.9.2 Hospitality
4.10 Deutsche Telekom
4.10.1 Aerospace and Defense
4.10.2 Manufacturing
Chapter V
VERTICAL MARKET FORECASTS
5.1 Overview
5.2 Methodology
5.3 Prognoses
5.3.1 US Total Wireline Market
5.3.2 US Business vs. Residential Wireline Markets
5.3.3 US Business Expenditures in Vertical Markets
5.3.4 US Wireline Data vs. Voice Markets
5.3.5 US Wireline Data Expenditures in Vertical Markets
5.3.6 The Wireless Data Explosion
Table of Figures
Chapter I
I-1 Drivers of Telecom Expenditures in Vertical Markets
I-2 Total US Telecom Wireline Market, 2003 and 2008 ($Billions)
I-3 Top Tier Expenditures for Telecom Services, 2003 and 2008 ($Millions)
Chapter II
II-1 Median and Mean Age per US Census Estimates, 1995-2000
II-1 Telecommunications Growth Cycle
II-2 US Access Line Annual Additions, 1985-2002 (Millions)
II-3 US LEC Access Line Quarterly Additions, 1999-2003 (Thousands)
II-4 US Wireline Access Annual Reductions, 2001-2008 (Thousands)
II-5 BellSouth Historical Private Line Quarterly Growth Rates by Circuit Type, 1999-2001
II-6 US Long Distance Minutes of Use Quarterly Growth Rates, Percent Change 2000-2003
II-7 US Intrastate and Interstate Long Distance Minutes, 2002-2007 (Billions)
II-8 Total Addressable Enterprise Voice Equipment Market, 1995-2009 ($Billions)
II-9 Enterprise Voice Extensions by Equipment Type, 1995-2009 ($Billions)
Chapter III
III-1 Drivers of Telecom Expenditures in Vertical Markets
III-2 Total US Employment, 1986-2006 (Millions)
III-3 Total US Business Establishments, 1992-2005 (Millions)
III-4 Average Monthly Long Distance Expenditures per Employee by Company Size, 2000-2003
Chapter IV
IV-1 BellSouth’s Sales Organizations
Chapter V
V-1 US Total Wireline Revenue, 2003-2008 ($Billions)
V-2 US Wireline Expenditures by Business vs. Residential, 2003-2008 ($Billions)
V-3 US Business Top Tier vs. All Other Telecom Expenditures, 2003 and 2008 ($Billions)
V-4 US Total Wireline Data Revenue, 2003-2008 ($Billions)
V-5 US Business Wireline Data Market Share, 2003 and 2008
V-6 Top Tier Telecom Business Wireless Data Revenue, ($Billions)
Table of Tables
Chapter II
II-1 SIC Divisions
II-2 Classification System Coding
II-3 NAICS Divisions
II-4 Wholesale Trade Representative Indices
II-5 Financial, Insurance, and Real Estate Services Representative Indices
II-6 Professional Business Services Representative Indices
II-7 Communications Representative Indices
II-8 Durable Manufacturing Representative Indices
II-9 Health Care Representative Indices
II-10 Retail Trade Representative Indices
II-11 Total North American Households with Broadband, 2003-2008 (Thousands)
II-12 Local vs. Long Distance Private Line Growth, 2003-2008
Chapter III
III-1 Selected Vertical Markets in Context (Year End 1997)
III-2 US Employment Projections by Occupation, 1996 vs. 2006 (Thousands)
III-3 US Employment Projections by Percentage Growth, 1996 vs. 2006 (Thousands)
III-4 Distribution of US Companies by Size, 2000
III-5 Telecom Expenditures by Establishment, 2003 Forecast
III-6 Industries in the Data Communication Lines and Corresponding Vertical Markets
III-7 Average Monthly Long Distance Expenditures per Employee by Size, 2000 vs. 2002 vs. 2003
III-8 Average Monthly Long Distance Expenditures per Employee, 2003
III-9 Average Number of Data Communication Lines per Site, 2003
III-10 Average Number of Direct Dial Lines per Site, 2003
III-11 Average Number of ISDN Lines per Site, 2003
III-12 Average Number of xDSL Lines per Site, 2003
III-13 Average Number of T‑1 Lines per Site, 2003
III-14 Average Number of T‑3 Lines per Site, 2003
III-15 Average Number of 800 Lines per Site, 2003
III-16 Sites with OC-3, 2003
III-17 Sites with FDDI, 2003
Chapter V
V-1 US Total Wireline Revenue by Type of Provider, 2003-2008 ($Billions)
V-2 US Business Wireline Revenue by Type of Provider, 2003-2008 ($Billions)
V-3 US Business Telecom Expenditures by Vertical Market, 2003-2008 ($Millions)
V-4 US Business Wireline Data Revenue as a Percentage of Local and LD, 2003-2008 ($Billions)
V-5 US Total Wireline Data Expenditures by Vertical Market, 2003-2008 ($Billions)
V-6 US Business Wireless Data Revenue as Percentage of Business Wireless, 2003-2008 ($Billions)
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Telecom
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