U.S. Ethernet Revenues Will Double, Reach $11 Billion by 2017, Says Insight Research

CEN Feature (Aug 9 2012) Business Ethernet , Metro Ethernet , Other analysts

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   Public Ethernet’s improving capabilities and declining costs in the face of escalating demand for transmission capacity will more than double its U.S. revenues over the next five years. Those revenues will climb from $5 billion in 2012 to $11 billion by 2017 as Ethernet increasingly becomes the business market's default data service, according to Insight Research's recently released annual report on the U.S. Ethernet market.  “Public Ethernet” is the term Insight Research uses to describe any Layer 2 public network carrier service that extends Ethernet beyond the LAN and connects to customers across Ethernet interfaces. 

   Carriers and Ethernet Services: Public Ethernet in Metro & Wide Area Networks, 2012-2017 says Public Ethernet’s biggest drivers continue to be its ability to satisfy seemingly limitless bandwidth requirements far more cheaply and flexibly than competing services. Those requirements include explosions of video and imaging, mobile data, social networking, data storage, cloud computing and more.

   Year-over-year percentage revenue growth will gradually slow as the U.S. Ethernet market expands, from a projected 24 percent in 2012 to12.5 percent in 2017. Compound annual growth over the next five years is forecast at 17 percent.   

   “Up through a couple of years ago, we saw 30 percent or more year-over-year Ethernet growth," says Robert Rosenberg, president of Insight Research. "While that is not coming back, 24 percent now and 12 percent in five years is awfully healthy growth for any business, especially on a multi-billion-dollar base.” 

   Carrier spending growth will moderate in percentage terms, too. This will occur as large carriers complete conversion of wireless backhaul networks from TDM to Ethernet and as they finalize LTE deployments over the coming years.

   Large carriers that want to increase their shares of the Ethernet pie as the market matures may over the next five years acquire smaller carriers that have built healthy businesses, says Rosenberg. This strategy provides large market players a lower cost per new customer, while offering a viable exit strategy to smaller service providers, he adds.   

   The recent purchase of AboveNet by the Zayo Group illustrates that the age of carrier consolidation is far from over. The acquisition follows on the heels of the 2011 combination of Level 3 and Global Crossing, says Rosenberg, noting that all of these carriers were major Ethernet providers.

   While Ethernet was adopted early on for its advantages over TDM-based private line, more flexible MPLS-based multipoint topologies that offer more profound efficiency advantages will lead the service's growth. 

   "A couple of years ago, Ethernet Private Line (EPL) comprised half of the market," says Rosenberg. "By 2016, it will only be a third.”  

   Today, according to the report, "any-to-any" E-LAN is the fastest growing Ethernet topology. As business customers gain increasing comfort with it, E-LAN will gain an increasing share of the service's growth from EPL.

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