MPLS IP-VPN vs Carrier Ethernet

Arun Chandrasekaran/Frost & Sullivan
21 Jun 2010

Despite the tough business climate in 2009, the Asia-Pacific (excluding Japan) WAN services market grew by 6.2% as a result of strong demand for MPLS IP-VPN and Ethernet services. Revenues from legacy technologies such as ATM and Frame Relay continued to decline, while growth in leased circuits was modest in 2009. Most of the existing ATM and FR circuits would be gradually phased out in the next three to five years as operators rationalize costs and enhance customer experience by switching to IP core.

Mass adoption

The bright spot in the enterprise data communications segment was the robust growth of MPLS IP-VPN and Ethernet. Between the two, MPLS IP-VPN has reached the mass adoption stage. MPLS IP-VPN grew by a 22.4% in 2009 due to the widespread adoption by SMB and enterprise customers. Customers prefer MPLS IP-VPN over legacy technologies such as ATM, FR and internet VPN (chiefly IPSec) due to the high quality of service, easy maintenance and managed services offered.

Ethernet services have experienced rapid adoption due to its speed, price and flexibility. Ethernet is rapidly emerging as a technology of choice in high-speed environments such as datacenter-to-data center connectivity, trading sites in financial services firms, and between HQ and large regional offices in a multinational environment. The Ethernet services market grew 27.2% last year.

The growth rate of the Ethernet services market is anticipated to outpace that of MPLS IP-VPN due to:

  • Rapid data center consolidation and need for high-speed connectivity to link regional offices with data centers
  • Speeding up data center-to-data center connectivity (increasingly being driven by regulatory compliance)
  • Simplicity and TCO advantages that Ethernet has over MPLS at high speeds
  • The self-managed nature of Ethernet that appeals to compliance-centric sectors such as banking.

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