Frost & Sullivan: Demand for Ethernet over DWDM brightens U.S. wavelength services market
FEBRUARY 8, 2010 -- Demand for high-speed bandwidth across verticals is driving spending in the U.S. wavelength services market, says market research firm Frost & Sullivan. The advent of Ethernet over DWDM is one of the key factors contributing to renewed interest in wavelength services, says the company in a new report, “U.S. Wavelength Services Market.”
According to the report, the wavelength services market earned revenues of over $1.2 billion in 2008. This number will climb to an estimated $2.0 billion in 2014, the report author estimates.
Frost & Sullivan describes wavelength services as less-expensive alternatives to SONET services for service providers and enterprises. Wavelength services have become an increasingly attractive option because of current economic conditions, the analysis firm asserts.
Carriers that need capacity for bandwidth-intensive services and are willing to sacrifice the protection of high-speed SONET connections are migrating their bandwidth needs to wavelength services, Frost & Sullivan says. Internet service providers (ISPs) and wireless service providers represent a major chunk of the spending in the wholesale wavelength services market, the company adds.
"There is a growing demand from key verticals such as financial services, healthcare, and government for native as well as Ethernet over Waves services," says Frost & Sullivan Senior Industry Analyst H. Roopashree. "The growth rates for wavelength services outpaced the growth rates of SONET, and this is partly due to Ethernet over Waves, and partly because of customers seeking a combination of higher bandwidth, reduced equipment requirements, and savings on power consumption."
The U.S. wavelength services market is considered a growth market at this stage, according to the report. Though native wavelength services such as OC-48 (2.5 Gbps) are in a mature stage, the recent attention that Ethernet has gained as a WAN transport service is positively influencing the wavelength services market. OC-192 is gaining rapid adoption as most service providers have embraced OC-192 to offer 10-Gigabit Ethernet services, the report maintains.
Finished Ethernet over wavelength products, particularly 10-Gigabit Ethernet -- LAN PHY and WAN PHY services -- are seeing a surge in demand both in the wholesale and retail sectors. High-bandwidth applications that encompass video conferencing, business continuity/disaster recovery, data center connectivity, and storage area networking are driving the demand for Ethernet-over-wavelength services, Frost and Sullivan reports.
Differentiating wavelength services continues to be a major challenge for service providers, the company continues. Native wavelength services are sold as plain high-speed bandwidth with limited scope for any kind of value-added services. Customers usually buy a transparent wavelength and use it for whatever application they intend to run on it, or sometimes they just ask for either 2.5- or 10-Gbps ports, without paying much attention to whether the service is wavelengths over SONET or Ethernet, Frost & Sullivan says.
"The highly commoditized nature of wavelength services, as well as the fact that the service has so far been largely limited to the wholesale space and long-haul services, has not forced service providers to offer much of value addition along with the service," cautions Roopashree. "So, most carriers in the market offer similar services, with the only differentiation being price, and price again varies from customer to customer depending on the number of carriers competing in a given market and the size of the customer."
Thus, pricing is an important criterion for customers while choosing a wavelength service provider, according to Roopashree. Emphasis must be placed on configuration and architecture, and participants in this arena must deliver best-of-breed offerings that provide scalability and flexibility for fast-track business progression, the report concludes.
“U.S. Wavelength Services Market” is part of the Communications Services Growth Partnership Service program, which also includes research in the following markets: directory assistance markets, wavelength services markets, enterprise voice services and mobility markets, wholesale managed services, and others. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants, Frost & Sullivan says.
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