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Steve Koppman
Consulting Analyst, Heavy Reading
Steve has covered the North American carrier industry for 25 years – nearly half that time for Gartner, where he was a principal analyst. For Heavy Reading, he has covered public Ethernet and IP voice...MORE
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Length: 20 Pages
Price: $1,495
REPORTS EXECUTIVE SUMMARY
40/100GE Service Update: Growth Takes Off Though Cost Ratios Lag

Exploding data volumes, particularly escalating capacity demand from proliferating bandwidth-intensive video, along with mobility and the cloud, are driving dramatic increases in bandwidth usage. Carrier networks are increasingly upgraded for 100G transmission. Ultra-high-bandwidth (UHB) Ethernet service – 40GE and 100GE carrier services – is rapidly growing, though still a relatively modest market presence and huge long-run market in an environment of massively increased bandwidth transmission and with Ethernet the predominant interface of choice.

As large customers increasingly may have five, 10 or 15 10G lines between locations, 100GE provides managerial advantages over and above any cost advantages from their larger scale. Operators want to offer fewer high-capacity links, simplify network routing and overcome aggregation limitations, better handle unpredictable traffic patterns from new applications and connectivity paradigms like mobility while transporting more and more content, especially video, and consolidating data centers. Larger pipes tend to average out multiple bursty data flows across individual connections that may result from video streaming, data storage and virtual networks, bringing greater bandwidth efficiency and lower cost per bit. So 100GE is seen as, beyond providing tenfold capacity increases, significantly improving network efficiency.

Adoption of the highest-end 100GE services is growing dramatically in 2015 even without any major shift in relative costs to economically justify them in relation to 10GE services already in widespread use. The number of 100G buyers has increased dramatically. In stark contrast to last year, each of several U.S. carriers already has double-digit customer numbers and UHB business volumes in or approaching the tens of millions of dollars annually.

While there are many more buyers in 2015 of at least one 100G or 40GE circuit – at least several dozen in the U.S. alone – this is still an early-adopter market dominated by very large, household name customers. The continuing relatively high ratio of 100GE to 10GE prices, as well as overall costs, keeps many potential buyers sticking with multiple attractively priced 10GE circuits, rather than migrating to higher bandwidth levels. Diffusion of 100/40GE services to a much larger buyer set is still to come over the next few years.

Over the next two to three years, 100G will become a major part of the wavelength market. We project U.S. 100GE revenues will total $95 million in 2015, more than tripling from the previous year, and will more than double again, reaching some $225 million in 2016 and $450 million in 2018. Despite this, 10GE will remain the dominant mainstream high-bandwidth level for enterprises for at least several years into the future. By likely five and almost certainly seven years from now, 100GE should broadly resemble the contours of 10GE today, with broadly similar price points.

While 100G will be the primary UHB speed into the future, there remains significant demand for 40GE among regional and short-haul long-distance enterprise buyers, particularly in the financial sector and among early adopters of that technology.

40/100GE Service Update: Growth Takes Off Though Cost Ratios Lag updates earlier reports on this subject, reviewing how both U.S.-based and some international carriers outside the U.S. are addressing UHB Ethernet services. It explores significant issues affecting adoption of 100GE and 40GE services, including equipment and service cost ratios in relation to long-established 10GE service. It explores the relationship between the 100G and 40G bandwidth levels, the nature of the adopter population and other market drivers. Finally, the report includes a market forecast of U.S.-based UHB services and reports on how various carriers are deploying and selling services.

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The following excerpt presents Heavy Reading's forecast of sales of UHB Ethernet service in the U.S. during the 2014-2018 period. 40GE was established before 100GE, and for that reason the two sectors had a similar modest magnitude of sales a couple years ago, prior to this forecast period. However, 100GE adoption has attracted much more new interest, and is growing much more quickly and dramatically, though 40GE continues to have strength within certain niches.

Excerpt


40/100GE Service Update: Growth Takes Off Though Cost Ratios Lag is published in PDF format.