Capital expenditure forecasts (capex) in the telecommunications sector remain a bit fuzzy – with the fuzziness pointing a little downward – for the months ahead.
One of the yellow lights was sounded by Cisco. Larry Dignan at ZDNet says that the company “delivered a strong fiscal second quarter and a healthy yet prudent outlook” but, nonetheless, pointed to an industry pause last month to reassess spending. Dignan quoted CEO Chuck Robbins’ comments on the earnings call. The transcript was a bit difficult to decipher, so Dignan helped:
In other words, wild stock market swings are impacting corporate confidence. Another key theme for Cisco was the shift in technology spending that falls in the capital expense category (think data center build outs and campus networks) and operating expenses that would be more in line with software as a service. The shift in IT is more toward operating expenses.
It makes sense both that market conditions and the shift from corporate building to leasing capacity would cause dislocation.
More indications that that things will progress slowly were provided by The Wall Street Journal in a report on a warning issued by Nokia. The paper said that the vendor “expects a slowdown in the telecommunications equipment market” and quoted CEO Rajeev Suri as saying that “increasing macroeconomic uncertainty” makes the outlook difficult, especially for the first quarter.
At times like this, it is worth remembering that things don’t always go as the experts say. TechDirt notes that the telecommunications ecosystem screamed that capital investments would be drastically curtailed by the Obama Administration’s reclassification of broadband under Title II in 2014. The sky, most said, was falling. The sky, as it turned out, stayed firmly in place:
But as the last year rolled on, people who could be bothered to actually read industry CAPEX numbers found that investment — much of it in Google Fiber markets — was as healthy as ever, if not better. Comcast announced plans to deploy two gigabit service to eighteen million homes, more recently unveiling plans for a major gigabit cable initiative in 2016. Time Warner Cable, Comcast and AT&T all spent much of the year crowing about notable speed upgrades and improvements, from expanded gigabit fiber pushes to housing developments, to notable DOCSIS 3.1 cable and set top box upgrades.
The two issues – the warnings sounded this week and the commentary by TechDirt on warnings sounded in the past – are not directly related. It is important, though, to understand that what the experts say doesn’t always happen.
That said, the combination of “macroeconomic factors” – roiling markets – and the shift from hardware to software with the advent of software-defined networks and network functions virtualization (SDN and NFV) suggest that this may be a time that the experts indeed are correct.
Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at [email protected] and via twitter at @DailyMusicBrk.