As buyers shift, wholesale data transport drop could mean commoditization is imminent

Recent findings by the Yankee Group (Boston, MA) indicate that wholesale providers are facing a significant gap in legacy services revenue. The group contends that the revenue gap is growing wider as wholesale buyers continue to migrate from formerly high-demand transport services such as Frame Relay (FR), ATM, and SONET private line to more flexible and cost-effective technologies such as metro and wide-area Ethernet.

According to a recent report, the FR and ATM revenue at risk makes up 23% of the total wholesale data market, making the industry vulnerable to a dramatic shift in the economic landscape. The report says that factors leading to the expanding wholesale revenue gap include private-line services showing steeper than expected revenue decline, an accelerated decline in product revenue as a result of industry consolidation, and waning demand in the growth of legacy services such as ATM and FR as demand for Ethernet grows.

The report, “Wholesale Providers Must Add Value to New Technologies Quickly to Protect Margins,” sees demand for Ethernet services rising as wholesale customers turn away from private-line products. According to the report, to effectively manage revenue during this transition, wholesale providers must deploy value-added features of differentiation, along with relative pricing strategies, early in the Ethernet cycle.

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