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AT&T Layoffs Just the Beginning of Telecom Pain

Reduced consumer spending will result in cycles of layoffs and decreased capital expenditure

By Nick McMaster, Newser Staff

Posted Dec 5, 2008 1:59 PM CST

(Newser) – AT&T’s elimination of 12,000 jobs is just the beginning of cutbacks that will radiate throughout the telecom industry, BusinessWeek reports. As pinched consumers cut back on communication spending, job and capital-expenditure reductions will only continue. One surprising statistic shows how consumers are downsizing telecom budgets: The fastest-growing segment of iPhone buyers is people who earn less than $50,000 a year.

Why is that bad for telecoms? Because many of those iPhone buyers are disconnecting their now-redundant landlines and even internet connections. One-fifth of Americans already live without landlines, and decreasing subscription will force telecoms to cut capital expenditure—as much as 34%, by some analysts’ estimates—forcing cutbacks among those who build equipment for the phone firms.

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A pedestrian talks on his cell phone while walking past an AT&T store Thursday, Dec. 4, 2008, in Chicago. (AP Photo/M. Spencer Green)

The USB760(TM) Micro Modem from Verizon Wireless gives customers a powerful, pocket-sized wireless broadband modem that runs on Verizon Wireless' high-speed network, which uses Evolution-Data Optimized... (PRNewsFoto/Verizon Wireless)

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Telecom will be one of those sectors of the economy that gets hurt more than other parts of technology.
- Susan Eustis, WinterGreen Research

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AT&T Layoffs Just the Beginning of Telecom Pain