Wall Street Journal has detailed article on how new web services spur phone firms to invest in increasing capacity. 

World-wide, spending on new telecom infrastructure is expected to rise to $240 billion in 2008, up 19% from 2005. 

Greater proportion of that spending is expected to be directed into accommodating Internet traffic like video. According to Infonetics Research:

• A typical Internet video file eats up 1,000 times as much bandwidth as an average email message. 

• Sending 100,000 emails costs a telecom company around 20 cents, transmitting 100,000 low-resolution videos costs around $15

• Sending 100,000 high-definition movies costs around $10,800, 

Spending on older types of gear is projected to drop to $7.7 billion in 2009 from $9 billion this year, while spending on the new products is expected to rise to $16.4 billion in 2009 from $12.1 billion this year, according to Infonetics.

Related Company Highlights:

• Covad Communications Group Inc. began a $50 million overhaul about a year ago.

• Juniper Networks Inc. posted annual sales growth of nearly 50% last year.

• Cisco reported a 40% increase in quarterly profits and a 27% jump in revenue.

• Avici Systems Inc.'s revenue has nearly doubled last year.

• Telefon AB L.M. Ericsson announced it would buy Redback for $2.1 billion

• After a wave of consolidation in US telecom industry, and AT&T and Verizon account for 56% of the North American industry's infrastructure spending, according to Infonetics.

• Nortel Networks. which hasn't shifted as much into making the new gear, last week announced job cuts of 2,900.

• Alcatel-Lucent said that it would shed 12,500 jobs, or 16% of its employees, over the next three years.