Insight

15 June 2010 |


CARRIER ETHERNET TO CONTINUE TO GROW THROUGH 2013

Carrier Ethernet equipment manufacturer revenue is projected to grow to $34 billion by 2013, according to Infonetics Research. IP NGN transformation projects depend heavily on IP, MPLS, and Ethernet, and are gradually employing the use of Ethernet transport instead of Sonet/SDH. Carrier Ethernet technology is integral to service provider IP NGN projects aimed at transforming from TDM- to packet-based networks to handle ever-growing consumer, business, mobile backhaul, and video traffic. Service provider investment in carrier Ethernet continues to defy the economic downturn and outpace overall telecom capital expenditure

FACT


Ethernet microwave is the fastest growing carrier Ethernet technology based on its use for mobile backhaul, according to Infonetics Research. Cisco led in worldwide revenue market share for carrier Ethernet switches, IP core routers (Ethernet), and IP edge routers (Ethernet) in 2008.


 

investments, according to Infonetics Research. Over the five years from 2009 to 2013, the research firm expects service providers worldwide to spend a cumulative $146 billion on carrier Ethernet equipment.

ETHERNET SWITCH CAPACITY GROWING
Enterprises are actively consolidating their data centres. There is a strong business case for enterprises to increase the utilisation and control of their assets by consolidating them to a central location. According to Dell’Oro Group’s Ethernet Switch July 2009 Five-Year Forecast report, this consolidation has been enabled by faster WAN connections, WAN optimisation technology to decrease latency in delivering applications and server blades.

At the same time, there are signs that various technology silos in the data centre might also start being consolidated: specifically, Ethernet, fibre channel, and high performance computing (HPC) technologies (Myrinet, Quadrics, and Infiniband), according to Dell’Oro Group. The research firm believes the early signs indicate that Ethernet will be the converged fabric of choice. 10 Gigabit Ethernet is very much at the forefront of this consolidation, currently as an aggregation technology.

10GBPS PORT CAPACITY DOMINATES
During the service provider outer market expansion from 2003 through 2008, OC192/STM64 and 10 Gigabit Ethernet (10GE) ports became increasingly popular, first as single ports on 10Gbps line cards and later as two ports on 20Gbps or four ports on 40Gbps line cards, according to Dell’Oro. In terms of total capacity shipments, 10Gbps ports accounted for the majority of port capacity through 2008, and will continue to be the dominant technology over the next five years. By 2011, Dell’Oro Group believes 100Gbps line cards will be available in many router platforms. These line cards will support 100GE ports but, more importantly, they will support 10 10GE ports. The increase in 10GE port densities on a single line card will enable reduced price points on a per-port basis and improve operational efficiencies – important drivers for increased product demand, according to Dell’Oro Group.



EDGE ROUTER SALES OUTPACING CORE ROUTERS
Service providers have given investment priority to edge networks over core networks over the last five quarters. According to Dell’Oro Group’s 3Q09 Routers report, edge routers accounted for a record-level 69% of the service provider router market, while core routers accounted for the remaining 31%. This is largely due to the allocation of larger portions of service providers’ IP network spending to edge routers that enable revenue-generating services. Although service providers continue to expand their core networks, most investments are for incremental upgrades focussed on managing traffic growth rather than large-scale projects to implement new technologies or network architectures.

According to the research firm’s 3Q09 Carrier Ethernet report, sales of carrier Ethernet routers experienced sequential growth for the second consecutive quarter in 2009. Since declining 19% in Q1 2009 due to the faltering global economy, demand for carrier Ethernet routers has rebounded steadily. Carrier Ethernet routers, which represent the cornerstone technology for many growing services such as IPTV, business VPNs and mobile transport, are on track to establish record sales levels over the next two or three quarters, and have become the technology of choice in service provider edge networks, accounting for more than 60% of all edge router sales, according to the research firm.

ETHERNET ENTERPRISE ROUTERS AND WIRELESS LAN EQUIPMENT REBOUND 
The Ethernet switch, enterprise router, and wireless LAN equipment markets have improved from the lows set in the first half of 2009, but are still down overall in 2009 compared to 2008, according to Infonetics Research. With the economic recovery under way, Infonetics expects sales to rise across the board in 2010 and beyond as companies make necessary infrastructure investments and slowly expand again.

The Ethernet switch market had a strong rebound in Q4 2009, growing 15% sequentially to $4.2 billion, according to Infonetics. On a year-over-year basis (Q4 2008 to Q4 2009), Ethernet switch port shipments are up 4%. Demand for new Ethernet switches continued in 2009, but buyers migrated to lower cost switches, which hurt revenue.

In Q4 2009, sales in the important chassis switch segment, a large revenue contributor due to their high price tags, showed the highest sequential growth, according to the research firm. Similarly, global enterprise router revenue had strong sequential growth in Q4 2009, up 10% from the previous quarter to $821 million while global wireless LAN equipment revenue held steady in Q4 2009 from the previous quarter, at $571 million.

FACT


Despite taking a dive along with the rest of the market in Q1 2009, the 10G Ethernet switch segment recovered well, with worldwide revenue growing 63% in 2009 over 2008, according to Infonetics Research.