IP/MPLS edge, metro Ethernet, and broadband hot investment areas, says report

JANUARY 11, 2007 -- Service providers around the globe continue making major investments to converge their data networks, reveals a new study by Infonetics Research. Changing traffic patterns and applications are the main causes of the convergence charge, with broadband Internet, metro Ethernet, and IPTV being the top three drivers causing IP traffic growth for carriers participating in Infonetics' (search for Infonetics) study.

"Carriers are experiencing decreases in legacy service revenue (ATM, frame relay, leased lines) and know the downward trend will continue, but they expect big increases from IP VPN, VoIP, and metro Ethernet revenue, and providers planning broadband and IPTV expect sizeable revenue increases from those services as well," reports Michael Howard, principal analyst at Infonetics Research. "A majority of carriers have started deploying significant numbers of Ethernet customer connections, and the study indicates that a good carrier Ethernet product is the best way to penetrate a new service provider account," he explains.

The study also reveals that:
• Metro Ethernet is tied as the #2 investment driver, up from #6 in Infonetics' 2005 study on the same topic.
• One of the hottest market segments now and for the next five years is the cellular base station backhaul; Over 50% of the study's respondent service providers offer mobile voice and data services, and of these, 100% build their own transport network to do the backhauling.
• 100% of European respondents will use Ethernet for broadband aggregation, 67% of Asia Pacific, and 60% of North America in 2007 or later; meanwhile, ATM drops precipitously.
• 75% will participate in interprovider QoS in 2007; IP VPNs and VoIP are the most common services that make use of interprovider QoS.
• Integrating new technologies and equipment is challenging for more European respondents (57%) than Asia Pacific (33%) or North American (27%).

The study, "Service provider plans for IP/MPLS: North America, Europe, and Asia Pacific," examines market and technology trends, drivers, barriers, implementation plans, expenditures, and vendor and technology preferences of carriers buying IP routers and multiservice switches. Infonetics' analysts interviewed 28 carriers in the three regions, of which:
• 68% are incumbents and 32% are IXCs, competitive operators, and ISPs;
• Average annual revenue is $16.6 billion in 2006; and
• 96% have IP/MPLS networks, 89% have Ethernet, 82% ATM, and 75% frame relay networks.