23 September 2002 -- The Ethernet Metropolitan Area Network (MAN) switch market continues to be held hostage by the downturn in the economy, says In-Stat/MDR in its report "Ethernet MAN Switches: The Truth Is Out There".
A "conspiracy" between the incumbent service providers and their traditional equipment vendors will continue to stifle the spread of "LAN-style" Ethernet MANs, until both venture capital availability and subscriber demand for high-bandwidth access come on strong again. However, Ethernet has proven itself to have a compelling set of market advantages, and despite the bleak picture in 2002, Ethernet MAN switches are expected to exhibit an end-use revenue compound annual growth rate (CAGR) of 56%, reaching USD5.9bn in 2006.
"The true extension of the LAN into the MAN space will take place, but it is most likely going to have to be done as an end-run around the existing service providers and their equipment vendors," says Lauri Vickers, manager of In-Stat/MDR's LAN group. "They will not give up their high-margin services or equipment to the inevitable commoditisation of Ethernet without a fight."
In-Stat/MDR also found the following:
-- Gigabit Ethernet will account for the majority of the Ethernet MAN switch market through 2006. However, 10 Gigabit Ethernet is expected to ramp up rapidly in this space and cannibalise Gigabit Ethernet implementations.
-- The market will be driven primarily by an increased demand for downstream bandwidth, the increasing localisation of traffic, the trend towards outsourcing, Ethernet's ability to offer dynamic allocation and plug and play upgrades, and the comparatively lower cost per gigabit that Ethernet offers.
-- Market barriers are high, and Ethernet will have to work hard to overcome market confusion about "enhanced" Ethernet, a tough venture capital climate for carriers, a lack of "dark fibre" in the MAN geography, resistance to commodity level margins from carriers and vendors, and the lack of a "killer app" to drive demand for Fast Ethernet and faster subscriber connections.