Washington, DC, U.S.A. — (METERING.COM) — July 8, 2009 – Total utility telecom-related spending in North America could top $5 billion in 2010, driven by government smart grid and broadband stimulus funding, according to a new study from the Utilities Telecom Council (UTC).
Based on a survey of the Council’s North American members, industry-wide spending on telecom related equipment and services was estimated at $2.33 billion in 2008. For 2009, spending is projected to increase by 13 percent to $2.64 billion. For 2010, utilities plan to spend an estimated $2.75 billion, up 4 percent over 2009 levels.
However, a major influx of telecom-related funding will flow into the utility business due to two major government spending initiatives, $4.5 billion in smart grid grants administered by the Department of Energy (DOE) and $7.2 billion in broadband deployment grants administered by the National Telecommunications and Information Administration (NTIA) and the Rural Utility Service (RUS), both mandated by the American Recovery and Reinvestment Act of 2009.
The UTC says that although both of these funding initiatives are still too new to estimate how much utilities will ultimately receive, it is clear that the $4.5 billion in smart grid grants could spur at least $9 billion in new spending on smart grid technologies given that the DOE grants require matching funds by the utilities themselves. Because smart grids are heavily premised on interactive and IP-based communications technologies, it’s not unreasonable to conclude that at least half of this total, or $4.5 billion, could flow to telecom equipment and service providers in 2010 and 2011.
Based on the survey data, smart grid-related spending that had been budgeted prior to the passage of the stimulus bill could reach nearly $600 million ($568 million) in 2009. When the government stimulus spending begins to reach the industry, then smart grid spending in 2010 could easily surpass $2 billion, with 2011 spending conceivably reaching even higher levels.
Although the broadband deployment funds will be disbursed to a wider range of companies, including phone companies and cable operators, for example, as well as other kinds of entities, many utilities are applying for and will likely receive some portion of these funds, particularly the $2.5 billion in funding made available via the Rural Utilities Service of the Department of Agriculture. Assuming that utilities generate only $1 billion of the $7.2 billion in broadband grants over the next few years, utility telecom spending could conceivably grow by yet an additional $0.5 million in 2010 and 2011.
Using these assumptions it’s clear that 2010 utility telecom related spending could top $5 billion, or more than double 2009 levels, then UTC says, adding that this growth stands in contrast to an overall soft telecom spending market. In the face of global economic weakness, most traditional kinds of telecom spending is expected to contract, or at the least stay static, in 2009.
The UTC also notes that transport networks, i.e. fiber, analog and digital microwave, WiMax, private-owned cabling and other technologies, and land mobile radio systems reflect the two largest categories of telecom spending for utilities.
The third largest category of spending is advanced metering, with spending of approximately $307 million in 2008 and a projected increase by 55 percent through the end of 2009 (excluding the California investor owned utilities). Although budgeted projections for advanced metering show a decline in advanced metering spending for 2010, the smart grid stimulus funding is likely to spur even more spending in this category, the UTC says.