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At ADC, we continue to look beyond the seemingly unending stream of negative headlines associated with the global recession in our pursuit of ongoing market opportunities in fiber-based and wireless networks. And, despite the recession, there is room for optimism for those in our industry who are well positioned to take advantage of key broadband market and technology trends.
Take China for example, which is investing $42 billion to upgrade its broadband infrastructure. As a leader in the design and deployment of next-generation network infrastructures for the world's largest telecommunications carriers, ADC is well positioned to help carriers in China as they continue their network build outs.
During the past year, ADC has utilized our Century Man operation's technology and expertise to provide solutions that support the continued expansion of China's robust communications network. Collectively, the 3G network investment, the acceleration of the migration from copper to fiber infrastructure, and emerging FTTX investments have made China a leading telecommunications CAPEX market over the past year.
Adding to our optimism in China is a recent study by Strategy Analytics, which found that broadband subscribers in the Asia-Pacific markets reached 160 million in 2008, and are expected to grow 40 percent by 2013 - with much of the growth occurring in China, India and Indonesia. Century Man's recent success and its expertise in developing products for the highly competitive China and Southeast Asian markets will be leveraged to enhance ADC's position in these emerging markets.
Looking at opportunities in other parts of the world, we're in pursuit of tenders for pieces of Australia's planned National Broadband Network, and remain poised to leverage our global customer base to take advantage of other stimulus programs that may emerge in European countries.
Pursuing Significant Domestic Fiber Opportunities
In the United States, there are a number of ways ADC expects to continue participating in the high-growth areas of next generation network deployments. Fiber-to-the-cell site is rapidly becoming one area with a significant amount of growth potential for our fiber-based network equipment with our largest customers. We estimate that there are approximately 200,000 cell sites in the U.S., with less than 10 percent of them fed by fiber today.
Bolstered by the public declarations of and our ongoing work with the biggest carriers, we anticipate the need to upgrade most cell sites to fiber over the next three-to-five years to support expectations for 3G, 4G, and LTE networks. Today, the focus is on fiber backhaul. However, we also expect carriers to realize the need for fiber connectivity inside the cell site to drive demand for ADC solutions, and to enable the mobile broadband speeds and services increasingly required by consumers.
Another much talked-about driver for network investment in the U.S. and elsewhere in world has been government-supported "broadband stimulus" packages that are largely focused on enabling Fiber-to-the-X (FTTX) networks. Details around the $787 million U.S. program have been somewhat slow to emerge, but the recent release of the "Notice of Funds Availability (NOFA) and Solicitation of Applications" should result in an initial distribution of funds to carriers and municipalities later this fall.
ADC offers hundreds of Rural Utilities Service (RUS) listed products to carriers serving rural areas in the United States and seeking funding from the American Recovery and Reinvestment Act (ARRA) of 2009. ADC's history as a FTTX solution provider began in 2003, with one of our first FTTX fiber deployments for rural applications in Windom, Minn. in 2005. Since then hundreds of rural carriers and municipalities have selected ADC FTTX solutions to provide broadband services to their subscribers. We anticipate participating significantly in the U.S. stimulus program over the next two or three years, both through our existing carrier customer relationships as well as via distribution.
Potential in Wireless
Finally, much interest remains in ADC's in-building and outdoor wireless solutions as bandwidth-intensive mobile devices and applications increasingly drive the need to "split" large, macro cell sites into microcellular networks that enable greater mobile coverage and capacity. Smartphone users are making up an increasingly large group, with some studies showing that device sales and data usage have more than doubled over the past year. A recent study by market research and consulting firm, Parks Associates, predicts that the number of smartphone users around the globe will grow to 1.1 billion by 2013. The migration to LTE is expected to only drive further the smartphone explosion, posing new network capacity challenges to operators.
In fact, operators are now competing on the basis of capacity and the range and quality of services and applications they offer. While many low-ARPU customers will continue to use mainly voice and SMS, the high-value, high-ARPU customers will want video and advanced applications that will require 100 MB per user service availability. This is already evident across many industries such as higher education, healthcare and hospitality where mobile applications are relied upon by professionals and the populations they serve. Operators who upgrade and architect their networks to deliver this capacity will end up with the lion's share of these high-ARPU customers, while those who don't will be left behind.
Upgrading these networks means moving to smaller cell cites and ensuring that subscribers can use their devices anywhere-indoors and outdoors. Here again, ADC is very well positioned and, regardless of the macroeconomy, we anticipate our wireless technology will gain further traction in the global marketplace as the move to smaller cell sites becomes essential.
It is important to reiterate that while we see sustained, long-term demand for our broadband network infrastructure solutions - fiber and wireless - we will continue to keep a sharp eye on the economic challenges facing most companies and countries around the world. Thus our continued focus on creating further operational efficiencies will remain very important, and we will remain nimble in this regard. ADC's commitment and number one priority is to create value for our customers AND our shareowners.
Robert E. Switz
Chairman, President and Chief Executive Officer
