Private-line service demand increases, while prices fall

Dec. 1, 2004

Despite increasing enterprise demand for bandwidth, the private-line service market will see revenue decline by the end of this year, contends a new report from Insight Research (Boonton, NJ). The sector’s revenue decline is a consequence of falling prices across all line speeds and segments.

A private line is a dedicated non-switched circuit or communications channel that is leased for a specified period. This channel provides a private and direct connection between at least two sites and is typically used by large enterprise data centers to connect to the Internet.

According to the report, private-line industry revenue will be down about 4% in 2004. New technologies like Gigabit Ethernet hold the promise to further reshape the local private-line market, while sales of wavelength services have the potential to radically alter the cost-per-megabit of transport at the upper boundary of the private-line market.

“The private-line market had a rough ride over the past two years,” reports Insight Research president Robert Rosenberg. “Even with demand increasing, it seems as though price-cutting has become the norm in all segments of the industry. Price discounting used to show up only as a significant factor in the wholesale-segment private lines (when carriers sold to other carriers)-now it seems as though those price cuts are impacting sales of retail circuits as well,” he concludes.

Insight’s report, “Private Line & Wavelength Services 2004-2009,” examines spending for local and long-distance private-line circuits by type of carrier and for wholesale and retail segments. Circuit counts by circuit speed are also included. For more information, visit www.insight-corp.com.

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