April 18, 2005 San Jose, CA -- An Infonetics Research study of 37 top tier service providers in North America, Europe, and Asia Pacific reveals that providers are adopting Ethernet as fast or faster than they thought they would, due to increasing demand from customers seeking Ethernet services, lower prices, and the convenience of incremental bandwidth.
According to the study, despite pressure to keep capital expenditures in check, service providers are responding to strong demand for more metro Ethernet services for fear of losing customers to competitors, which is driving metro Ethernet equipment sales.
"Ethernet is on pace toward metro service dominance over the next five to ten years. We interviewed carriers for a similar study last year, and at that time they were conservative in some of their estimates of when and where they would adopt Ethernet technologies or offer new types of services. In many areas, they are definitely moving at a faster clip than predicted, like in delivery of services and adoption of Ethernet technologies, and they're on track in most other measures of Ethernet use," explains Michael Howard, principal analyst of Infonetics Research and lead author of the study. "If manufacturers can deliver carrier-class Ethernet products with end-to-end QoS, it will speed up the adoption curve even more."
Among many issues, says the study, service providers are considering how to offer Ethernet services: whether over SONET/SDH rings to leverage the installed infrastructure, over existing IP/MPLS networks, or by building separate overlay Ethernet networks. According to the study, to reach small and medium businesses, service providers are considering Ethernet over IP/MPLS and Ethernet overlay networks that have lower costs.
Sample findings of the study include:
* 86% of the service providers interviewed say their customers' demand level is high for metro Ethernet services, with about 60% reporting high demand for moving from legacy services to IP VPNs and Ethernet services.
* Incumbent providers rate competition, revenue growth, cannibalization, profitability, and reducing opex higher on their list of business challenges than do competitive service providers.
* 44% of incumbents rate customer retention highly as a business concern, compared with 5% of competitive service providers.
* 2/3 of respondents offer packetized voice as an Ethernet service, up from 1/3 last year, and 84% plan to offer it by January 2006.
* Data storage and recovery are popular service offerings in 2005, including storage backup, SAN extension, and data-center mirroring.
* Security services are also popular, with stateful firewall, encryption, DoS prevention, and URL filtering, all being offered by a substantial number of carriers by January 2006.
* A wide variety of technologies are being used to deliver Ethernet services, principally Ethernet over fiber; by 2006, Ethernet over copper (T1/E1/J1, etc.) will be used by two-thirds of the respondents, and Ethernet over WiFi and Ethernet over WiMAX will each be used by about a third.
The study, "Service Provider Plans for Metro Optical and Ethernet," confirms that a clear move in DSL networks from ATM to Ethernet is underway. Of the 70% of study respondents that have DSLAMs, 92% said they use ATM DSLAMs with ATM uplinks now, dropping to 78% in 2006, when almost three-quarters are projected to use Ethernet uplinks and IP/Ethernet-based DSLAMs. Currently ATM DSLAMs are popular in North America and Europe, and IP/Ethernet DSLAMs are popular in Asia Pacific, according to the study.