Wholesale world 2012: US wholesale market trends 2012
ATLANTIC-ACM takes a look at all the emerging trends across the US wholesale market in 2012 and beyond.
US wholesale evolution is powered by growth in demand for mobile backhaul and the emergence of wholesale mobile solutions. As a result, ATLANTIC-ACM expects the US wireline and wireless wholesale market to add approximately $700 million in revenue from 2011 to 2016 (see figure 1). These new emerging growth engines will help stave off declines driven by migration from legacy voice and data products. With distinct emerging product opportunities opening up avenues for wholesale growth, ATLANTIC-ACM expects the US wholesale market to maintain a relatively healthy future despite ongoing declines in demand for legacy products.
Out with the old…
ATLANTIC-ACM surveys, interviews and forecasts all point to accelerated migration from traditional voice and data products. Provider demand for legacy TDM voice and TDM-based long-haul transport continues to decline as buyers migrate to IP-based voice services and Ethernet-based transport services. Pressure in the TDM local transport market will emerge in 2012, as wireless providers continue to disconnect DS1 and DS3 backhaul circuits and convert to Ethernet-based fibre solutions.
This technology-based shift away from higher cost-per-unit legacy products is emerging within a wholesale marketplace undergoing significant pressure from the macro level. Consolidation among service providers is a chief macro trend impacting the space, as the integration of Global Crossing into Level 3, PAETEC into Windstream, and other large CLEC consolidations drive continued pressure across the industry.
Similarly, carriers deploying network in-sourcing strategies are putting pressure on overall wholesale revenues. Examples include CBeyond’s recent efforts to move from purchasing TDM-based transport solutions to developing its own Ethernet-over-copper end-user connections or the impact of Time Warner Cable’s move to in-house its wholesale voice needs on the wholesale VoIP market. Other carriers will deploy network in-sourcing models as they attempt to constrain costs while enhancing end user experiences, which in many cases leads to reconfiguring and repurposing existing network assets.
…in with the new
On the growth side of the equation, continuously expanding bandwidth
Significantly smaller growth is projected for SONET- and Wave-based services. And, as detailed previously, customers are cutting spend on legacy TDM-based (DS3 & below) transport services. Current Ethernet demand is primarily driven by a surge in mobile backhaul requirements in support of bandwidth-consumptive smartphone and tablet applications at the retail level. US mobile provider efforts to rapidly build out 4G LTE networks are driving increased demand for Ethernet-to-cell solutions at greater rates than many analysts and network planners had anticipated. Further, from the macro level, wireless buyers, on average, increased their portion of spend to metro Ethernet transport from 16% in 2010 to 29% (see figure 3) in 2011.
All other wholesale buyers – such as CLECS, ILECs, resellers, cable providers – continue to convert to Ethernet as well. In the same Metro Carrier Report Card, all other buyers reported spending growth on
New models, new clothes
Carriers are actively reshaping their business models and product portfolios to address new growth opportunities. US carriers with mobile networks are adding deeper mobile resale and M2M products to their wholesale portfolios. Although mobile resale has existed for many years, carriers have shied away from enabling other wireline competitors with wireless offerings (sticking with the enablement of niche-based MVNO plays). This paradigm has begun to shift, with increased efforts to
Mobile operators are also flirting with wholesale opportunities in the nascent M2M space. This space is currently the “Wild West” of mobile, lacking defined business models but the potential for infinite revenue-generation opportunities.
Overall, the space is characterised by low-ARPU deals but holds the promise of massive scale, and carriers are working feverishly to capture revenues independent of which entrepreneurial models succeed at the
Long-term trends accelerating
In the end, the current marketplace is panning out as has long been expected, but at a faster rate, due in large part to smart devices and applications that are driving demand that reaches deep into the wireless and wireline industries.
Other drivers lead to the same destination – massive demand for wholesale Ethernet today and a dizzying universe of M2M opportunities tomorrow that will eventually reach into wireline infrastructure.
We are moving toward innovation-based economies both domestically and internationally, and, as with the information revolution, our industry will be the fuel that makes them happen.
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