Vertical Systems’ 2011 Global Provider Ethernet LEADERBOARD Grows Even More Concentrated

CEN Feature (Mar 8 2012) Vertical Systems

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   In 2009 there were only five companies that could claim they had 4% or more of the global Ethernet market share to themselves. Now there are seven leaders sharing 60% of the total Ethernet ports installed worldwide, according to Vertical Systems 2011 Global Provider Ethernet Leaderboard. That is 13% more than the six leading companies shared a year ago, but it is getting crowded at the top.

   “The new numbers are not a function of market growth. It’s more representative of consolidation and concentration of the market into a small group of larger vendors,” says Rick Malone, principal at Vertical Systems Group. “These are the companies that come to mind first when you think about global networking. As they expand naturally, and add Ethernet and its capabilities to their worldwide networks, they are getting more business from multinational companies.”

   The 2011 leaders, in order of their port share outside of their home countries, are: Orange Business (France), Verizon (U.S.), Colt (U.K.), AT&T (U.S.), NTT (Japan), Level 3/Global Crossing (U.S.), and BT Global (U.K.).

   The growth from five leaders to seven since 2009 is no surprise, because the market in 2009 was much more fragmented, says Malone.

   “I’d expect we’ll evolve to eight by next year, but I don’t think we’ll ever get more than one or two more,” he adds, noting that the Leaderboard has a physical limit of 25.

   Orange has held the top spot for several years now, but a shift in every ranking could very well take place as the market becomes even more concentrated over the next year, Malone explains. In addition to BT Global’s ascendance to the Leaderboard, four companies shifted their rankings between 2010 and 2011. Verizon jumped over Colt to take second place. This exchange occurred mostly because Colt does so much of its business, outside of the U.K., in Europe, says Malone.

   “Colt had quite a bit of distance between it and the rest of the pack prior to this. But now the companies right behind are closing in,” he adds. “Colt needs to expand its service portfolio or their geographic reach in a significant way outside of Europe, like others have.”

   Switching fifth place for fourth, AT&T eclipsed NTT in 2011. Ironically, NTT lost its ranking even though its share of ports grew a bit over the year. AT&T’s rise in rank is largely due to the fact that the company’s worldwide IP/VPN customers are putting in Ethernet access.

   “That’s a big part of their business right now and they are putting Ethernet ports in by the hundreds of thousands,” says Malone.

   Level 3’s acquisition of Global Crossing helped it stay firmly planted on the Leaderboard, while BT Global rounded out the group. BT Global’s advance onto the Leaderboard is due to the large amount of business the company does outside of Europe, and its expansion of E-LAN services worldwide last year, Malone explains.

   Level 3 and BT Global will wage a good battle on the Leaderboard during the coming year, he adds. Level 3 combined with Global Crossing has the potential to be a strong player worldwide as their merger matures. Meanwhile, BT Global, which “arrived relatively late to the Ethernet game” is gaining a lot of business in Asia and South America, where the economy is growing, says Malone.

   Waiting in the wings

   As with the recently released 2011 U.S. Business Ethernet Leaderboard, the 2011 Global Leaderboard includes a “challenge tier” list of up-and-coming Ethernet providers. The next company to hop to the top of the Global Leaderboard could come from these three companies, in alphabetical order based on port share, include Reliance Globalcom (India), TaTa Communications (India) and T-Systems (Germany). The contenders add two new countries, India and Germany, to the list of countries with the most market share overall.

   Reliance Globalcom is positioned so well because of it acquisition of Yipes, a leader in the early days of Ethernet. Reliance also has some undersea cable businesses that enable the company to exploit its Ethernet private line business, says Malone. TaTa also is gaining ground. The company also boasts a healthy private line business, which connects enterprises to Asia and Europe, primarily via Ethernet over Sonet/SDH. T-Systems is in the challenge tier because it is the subsidiary of Deutsche Telecom that handles international business.

   “T-Systems has just been cranking along with its Ethernet,” says Malone. “ It’s a big company with a lot of resources, and there are a lot of multinationals in Germany. T-Systems specializes in supporting those multinationals.”

   Which companies will remain atop the global Leaderboard and which will drop in their ranking between now and next year remains a mystery. However,  2012 is likely to be the most dynamic year to date.

   “It’s fairly fluid. The companies on the Leaderboard are a lot more closely bunched together than they were last year,” says Malone. “The shares are much tighter and we are expecting some shuffling over the next year. No question about it.”

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