North American Metro Ethernet Services Markets

A new study shows that specific opportunities will be particularly lucrative for metro Ethernet providers, but also describes challenges, the most pressing of which is price pressure.

by Frost and Sullivan [October 17, 2006]

This is the executive summary of the North American Metro Ethernet Services Markets report from Frost and Sullivan.

Executive Summary
The rapid growth of data in Metro Area Networks (MANs) has resulted in more stringent requirements for the underlying transport technology and its ability to efficiently transport high-bandwidth traffic in a cost-effective manner. Data now dominates in terms of traffic type across metro networks, many of which are still TDM/SONET(Time Division Multiplexing/Synchronous Optical Network)-based. Such legacy technologies were designed for voice/circuit-switched networks, although they have been modified to adapt to the rapid increase in data traffic. However, Ethernet's ubiquitous presence in local area networks, its ease of use, low cost, and suitability for data transport are driving its growing presence in MANs.

The adoption of Ethernet combined with IP backbones and the widespread availability of optical fiber and wavelength division multiplexing (WDM) technology is transforming the metro environment. Ethernet's ability to provide granularity, ongoing progression with development related to carrier Ethernet standards, and the lower capital expenditure (capex) and operating expenditure (opex) required to deliver Ethernet services versus TDM continue to drive adoption of this technology.

Price compression has been intense for the past five years but is beginning to ease, largely due to service provider consolidation. This is expected to continue over the next few years. Some of the largest opportunities will come from vertical markets such as financial, healthcare, legal, and government. Bandwidth-hungry applications, including data center connectivity, disaster recovery, financial/banking exchanges and extranets, and medical imaging, will all drive Ethernet adoption not only in the metro, but at national and global levels as well.

The North American Metro Ethernet Services Market consists of a wide range of carriers who sell Ethernet point-to-point, Ethernet access, and Ethernet multipoint services to other service providers and business end users. Wholesale and retail carriers can include Regional Bell Operating Companies (RBOCs), Interexchange Carriers (IXCs), Incumbent Local Exchange Carriers (ILECs), cable multi-service operators (MSOs) and Competitive Local Exchange Carriers (CLECs), who can in turn sell their services to the same, as well as online content providers, Internet Service Providers (ISPs), Postal Telephone and Telegraph agencies (PTTs), other resellers, systems integrators, and wireless operators.

The North American Metro Ethernet Services Market is extremely competitive in terms of pricing, largely due to the sheer number of service providers that offer some level of metro Ethernet connectivity today. Mergers in the telecommunications sector in both Canada and the United States over the past few years have helped with some early price stabilization, experienced by some carriers, but there are still far too many providers in this market today and further consolidation is expected.

This research study covers the North American market for metro Ethernet services through the period 2004 to 2012. This analysis includes segmentation by retail (sales to enterprises) versus wholesale (sales to service providers) revenues and percentage breakouts of revenues by customer type and vertical markets. This study covers the North American Metro Ethernet Services Market only. It does not include revenues from inter-city (long haul) Ethernet services.

— End

Copyright Frost and Sullivan, 2006. Reprinted with permission.

For additional information, contact Mireya Castilla at 210-247-3830.