IP edge-device market revenue to surpass multiservice switch market

April 1, 2001

The North American network edge switching and routing market netted $7.6 billion in 2000 and will experience a 44% compound annual growth rate (CAGR) to reach $33 billion by 2004, says a new report from market-research firm RHK Inc. (San Francisco-see Figure). IP-centric network edge equipment, which comprised 37% of equipment-vendor revenues in 2000, will account for 60% of revenues in 2004 at the expense of the current ATM and frame-relay network edge market.

Per the report, IP edge equipment comprises devices that sit at the edge of the service-provider network and take traffic to and from the access segment and feed it to and from the network core. Such devices include aggregation routers, session management devices, and service creation devices.

The market for service creation devices, which allow service providers to offer IP-based, value-added services, is expected to grow at a 90% CAGR during the forecast period. This segment is potentially explosive, says Bob Larribeau, director of edge switching and routing. "As a result, we expect IP-based systems to be increasingly pervasive as providers better exploit services that expand the revenue-generating abilities of IP networks."

While the market for multiservice products, including ATM and frame-relay switches, is projected to jump from $4.7 billion in 2000 to $13 billion by 2004, this segment is and will continue to be affected by the increasing dominance of Internet Protocol (IP) in service providers' networks.

ATM is not dead, however. "Many service providers are building out their IP networks and realistically still depend on some ATM and frame-relay access technologies to support their existing customer base," says edge switch and routing analyst Rosalyn Roseboro. "While the world is migrating to IP, our numbers indicate that multiservice products will remain a significant but lower-growth market. ATM continues to have quality-of-service advantages over IP, so we expect to see some carriers opt for a degree of ATM depth in their networks for near to intermediate term," she adds.

RHK's "Edge Switching & Routing: Market Forecast and Analysis," is published as part of its Edge Switching & Routing Service. For more information, call 650-737-9600 or visit the company's Website at www.rhk.com.

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