Ethernet services will lead recovery in 2010

Ian Redpath/Ovum
14 Jan 2010

Enterprise Ethernet services were a growth area in a recessionary 2009, and will be a driver for recovery of the telecoms equipment and components market in 2010. Service providers will need to invest in latency and ubiquity in order to be competitive.

Enterprise Ethernet service revenues are projected to grow at a 12% rate from 2008 to year-end 2009, which is impressive given the recessionary backdrop of 2009. In contrast, the optical networks equipment and optical components markets are projected to be down -9% and -21% respectively for 2009.

The main driver for enterprise Ethernet service growth is substitution from lower-speed and more costly legacy data services. Carriers are making investments in the Ethernet service area, including extending geographic reach, upgrading the customer access and demarcation points, refreshing Ethernet service delivery and switching platforms, and upgrading the underpinning optical network cores. The ongoing growth of Ethernet services will assist in the projected recovery of the network equipment and components sectors in 2010.

Transition to service competition

Ethernet is also undergoing a transition from a market in an early stage of development to a more competitive market. The services value proposition will shift from rudimentary ‘low-cost pipes’ to one focused on performance and ubiquity of the carriers’ services.

This shift is driving carrier activity and investment behavior. Carriers are deploying more carrier-grade network interface devices to monitor and manage service performance right into the end user’s premises.

Be quick about latency

Latency is a key service differentiator in the eyes of discerning customers. For a number of years, the more sophisticated customers (i.e. major financial institutions) have included latency benchmarks in services RFPs. Colt conducted a competitive analysis of latency performance on key city pair routes and came to two conclusions: they needed to improve latency based on physical fiber routes and on its network architecture/equipment. Colt has added bisecting physical fiber to reduce fiber distances (and latency) between key city pairs.

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