New Market Research Report

Technology Forecasts for Local Exchange Circuit Equipment

AUSTIN. Texas, November 2001-Technology Futures, Inc., an internationally-recognized leader in telecom forecasting, announces the publication of a new report entitled Technology Forecasts for Local Exchange Circuit Equipment, authored by Ray L. Hodges. This report describes and quantifies the impacts of new transmission technologies such as xDSL (digital subscriber line) and dense wave division multiplexing (DWDM). The research was sponsored by the Telecommunications Technology Forecasting Group (TTFG), a consortium of telephone companies comprised of Bell Canada, BellSouth, Qwest, SBC Corporation, Sprint, and Verizon.

The vast majority of telephone plant investment falls into the three categories of outside plant cable, switching, and circuit equipment. Circuit equipment - often referred to as transmission equipment and including carrier transport equipment, special services equipment, local exchange test equipment, and radio facilities equipment - has traditionally played a vital supporting role for switching equipment and the outside plant. Today, functionality that previously resided within switching and the outside plant is actually being displaced by circuit equipment.

These trends have resulted in the circuit account proportion growing at a rate more than double (over 10%) the overall growth rate in telephone plant investment (less than 5%). According to author Ray Hodges, "Most of the improvements and upgrades to the telephone system are in electronic components associated with fiber or copper cable, not in the actual cable or in switching. This includes SONET upgrades, DWDM, and ADSL."

This study forecasts the transitions and quantifies how circuit technology such as fiber optics is being adopted. It also quantifies the impacts new technologies such as xDSL and DWDM are having on the remaining life and value of existing circuit equipment. Mr. Hodges emphasizes, "the fact that the circuit equipment account is growing by no means indicates that the equipment lives are stable or lengthening. The account is very dynamic, and every vintage of telephone plant technology is rapidly made obsolete by continuous advances in electronic and optical innovations."

Some of the key findings that may of particular interest to a broader audience can be found below.

• Circuit equipment represents approximately 23% of the incumbent local exchange carrier (ILEC) $355 billion plant investment and has an average remaining life (ARL)* of 3.2 years.
• Circuit equipment investment is growing at a rate more than double (over 10%) the overall growth rate in telephone plant investment (less than 5%) since more functionality is being booked to the circuit category.
• The remaining lives for categories of circuit equipment range from 3.0 years for pre-SONET (Synchronous Optical Network) digital equipment (over 60% of the circuit investment) to 7.7 years for ADSL (currently less than 2% of circuit investment). However, the life for some of the early product lines of ADSL may be much shorter.
• SONET equipment currently represents over 25% of the circuit account investment with an ARL* of 3.4 years. The vast majority of this equipment operates at relatively low speeds and will continuously be made obsolete by higher SONET speeds and/or DWDM.
• There will be a transition from today's voice and data over circuit, ATM, and SONET to voice and data over IP and non-SONET DWDM in the 2015 to 2020 timeframe.
  *ARL is the time period that the LECs need to recover their investment in existing circuit equipment.

This report would be of interest to local exchange carriers, competitive LECs, interexchange carriers, Internet service providers, telecom equipment manufacturers, regulatory personnel, and depreciation professionals.

An expanded table of contents and a list of exhibits follow this press release. We would be pleased to have this report reviewed by your publication and/or be quoted for articles examining the subject matter. Mr. Hodges would also be glad to be interviewed and quoted for articles relating to the subject matter.

Author Ray L. Hodges brings 30 years of telecom expertise and experience to his work at TFI, including 25 years with GTE Telephone Operations. His interests are focused on emerging wireless technologies and markets and their impacts on the public telecom network. Mr. Hodges' views and the results of his research are regularly cited by such prestigious publications as Telephony, America's Network, Lightwave, Wired, Inter@ctive Week, and Wireless Systems Design.

Technology Futures, Inc. helps organizations plan for the future. Drawing on proven, quantifiable forecasting methods and strategic applications, we customize our approach to the technology, financial, and marketing issues facing our clients. Our services include consulting, research, and education.

We are always happy to comment on the subject of technology and telecom trends. A partial list of TFI citations from many major publications can be found at TFI News.

PRESS CONTACT-Please contact Ms. Carrie Vanston by telephone at (323) 436-0314 or by email at cvanston@tfi.com with questions about the report and/or to arrange an interview with Mr. Hodges or another technology and telecom expert at TFI. If you need assistance immediately and Ms. Vanston is unavailable, please contact the corporate offices in Austin at (512) 258-8898 or (800) 835-3887.

PURCHASING CONTACT FOR YOUR READERS-Readers interested in purchasing the report should contact Debra Robison, Technology Futures, Inc. at (800) TEK-FUTR or (512) 258-8898, fax (512) 258-0087, or send email to pubsales@tfi.com. The 67-page report is priced at $3,000 in North America and $3,015 elsewhere. Thank you for your attention.

New Telecom Market Research Report
Technology Forecast for Local Exchange Circuit Equipment

Table of Contents

Chapter 1
Introduction

Chapter 2
Circuit Overview

Chapter 3
Analog to Digital

Chapter 4
SONET for Pre-SONET

Comparison to Previous Forecasts

Remaining Lives for Pre-SONET Equipment

Chapter 5
VDSL & FITL for DSL

Chapter 6
Advanced Optical Networks

Impact of Advanced Optical Networks

Chapter 7
Investment Mapping & Life Calculations

Investment Mapping

Life Calculations

Chapter 8
Survey Description & Results

Part 1 - Loop Circuit Equipment

Part 2 - Interoffice Transmission

Part 3 - Interoffice Bandwidth Management (Crossconnect & Multiplexing)

Part 4 - Outside Plant Modernization Plans

Part 5 - ATM/Packet Expert Survey

Current Investment Breakout

Chapter 9
Summary & Conclusions

Appendix A

Circuit Equipment

Analog Test and Miscellaneous

Digital Test

Metallic and Pre-SONET Fiber DLC

SONET Fiber DLC

Transport T-Carrier

Optical Transport (Pre-SONET)

Optical Transport (SONET)

WDM and DWDM

Packet Type Transport (Non-Switching)

Asymmetrical Digital Subscriber Line

Other and Analog Miscellaneous

List of Exhibits

3.1   Analog Circuit Survivors
3.2   Tabular Data
4.1   Interoffice SONET
4.2   Interoffice SONET Equipment - Percentage of Fiber Transmission Capacity
4.3   Loop SONET
4.4   Loop SONET Equipment - Percentage of Fiber Transmission Capacity
4.5   Adoption of SONET Equipment Summary - Percentage of Equipment on SONET
4.6   Comparison to 1994 & 1997 SONET Forecast
4.7   Comparison of SONET Adoption to the 1994 Forecast
4.8   Pre-SONET Survivors
4.9   Pre-SONET Circuit Equipment Survivors
5.1   Households Using Digital Services - Minimum Competitive Data Rates
5.2   ADSL Survivors
5.3   Tabular Data
5.4   xDSL Households - Middle Scenario
6.1   Transition to IP/DWDM
6.2   ATM, SONET & WDM Survivors
6.3   Tabular Data
7.1   Investment Mapping Summary
7.2   Composite Survivor Curve - Tabular Data
7.3   Composite Survivor Curve for Circuit Equipment

Technology Futures, Inc.
13740 Research Boulevard, Building C
Austin, TX 78750
(800) TEK-FUTR (U.S. and Canada)
(512) 258-8898, Fax: (512) 258-0087
e-mail: cvanston@tfi.com