North American phone companies continue to spend less on their wireline networks, but wireline gear suppliers can still thrive if they focus on specific market niches, according to a report issued on Tuesday.

Equipment makers that supply fiber optic equipment, Internet routers and switches, and digital subscriber line access gear are seeing solid growth in overall demand, according to John Lively, the Ovum-RHK analyst who wrote the report.

On the other hand, sSuppliers targeting Sprint’s or Bell Canada’s wireline businesses could see decreases in demand, he said.

Overall North American carriers’ capital expenditure on their wireline networks was $7.1 billion in the second quarter, a 5.3 percent drop from the second quarter last year.

Wireline revenues for the second quarter were essentially flat at $43.6 billion.

But the overall numbers tend to blur the divergent patterns occurring in the various telecom sectors or among the top tier carriers, said Mr. Lively.

For instance, AT&T’s capital expenditure was down a jarring 15 percent in the second quarter while spending from Embarq, the largest non-Bell carrier in the U.S., soared 18 percent. Sprint’s capex was down 28 percent while Verizon’s was up 4 percent.

“For suppliers, it makes a very big difference who your customer is,” said Mr. Lively. “But suppliers have to look at the sector because although AT&T had a big drop-off, they spent a lot on long haul (fiber-optic) equipment.”

If there is a major growth sector, according to Mr. Livley, it is the optical equipment market.

The two largest U.S. carriers, AT&T and Verizon, are spending billions of dollar's to bring fiber optics to the American home as the carriers attempt to distribute TV, video and other high-bandwidth services to consumers.

Another Ovum-RHK report released on Tuesday has global revenue for optical equipment growing to $3.5 billion in the second quarter which represents a 20 percent increase from a year ago.

AT&T was one of the major spenders on optical equipment according to the report.  

Router vendors such as Cisco and Juniper are also seeing significant growth in carrier demand, along with companies that market broadband access devices such as DSL, according to Mr. Lively.

“But DSL is starting to hit the wall because DSL penetration is starting to hit 50 percent penetration of the country and that is usually when a market starts slowing down,” Mr. Lively said.