U.S. carriers hope MPLS-based services will offset declining voice revenue, reports Yankee Group

August 23, 2004 Boston--According to the Yankee Group report, Top U.S. Carriers Fine-Tune Market Strategies for Layer 3 MPLS VPNs, MPLS VPN services have emerged as an important component of offsetting traditional voice revenue fall out.

However, the MPLS positioning strategies of the top seven U.S. carriers vary greatly. Incumbents AT&T and MCI continue in their efforts to migrate existing Layer 2 customers to MPLS. In parallel, the historically conservative approach of the challengers becomes increasingly aggressive as competition for enterprise business continues heating up.

"Differentiating MPLS product offerings based on features and benefits will not be a sustainable long-term advantage beyond the next 18 months," says David Parks, Yankee Group Telecommunications Strategies United States senior analyst. "A carrier's ability to serve an enterprise's geographic requirements in a consistent fashion--whether they are regional, national or international--will dictate market success. As a result, the challengers will keep coverage area expansion at the top of their lists in 2004."

Sprint will shift its focus from domestic to international support. This will enable it to compete more effectively for large enterprise business. BellSouth, SBC, Qwest and Verizon will remain focused on achieving national coverage. Understanding they cannot address the international requirements of most large enterprises, they will target the mid-market with their MPLS services.

AT&T and MCI will continue their aggressive positioning with an active focus on customer migration to MPLS. Protecting their installed base of frame relay and ATM business is becoming more difficult with the onslaught of competitive Layer 3 MPLS offerings. Therefore, the success of their migration effort is critical to their WAN services strategy.