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40/100G Ethernet Services Forecast: Demand Will Hinge on Lower Costs
Despite continual rapid increases in bandwidth demand, and although "ultra-high-bandwidth" 40 and 100 Gigabit Ethernet (GE) have gained substantial ground as technologies within carrier networks, adoption of corresponding services sold by carriers is still in its infancy and progressing rather slowly, stymied by high equipment prices.

Even if bandwidth projections are somewhat overblown especially when extrapolated more or less indefinitely into the future rapidly rising bandwidth demands appear an obvious reality to which Ethernet is typically viewed as the most cost-effective and flexible carrier service response. Ethernet has continued to gain momentum as the predominant choice for "big data" connectivity. This has given rise to the start of a move up from now well-established, high-bandwidth 10GE to "ultra-high-bandwidth" (UHB) Ethernet networking, 40- and 100GE technologies becoming increasingly established within carrier networks worldwide though not yet as widely used as services.

Despite continued tremendous growth in bandwidth demand in the U.S. and around the world, and the fact that Ethernet service is becoming the most popular modality for providing it, adoption of UHB Ethernet service remains relatively slow, hampered above all by high equipment costs.

The key issue is the "cost ratio" the relationship between costs of the new higher-bandwidth level (in this case primarily 100GE) to the well-established lower-bandwidth level (10GE). Carriers broadly believe this ratio will reach about 6:1 over the next two years a point where a 100GE line can be purchased on average for a similar price as six 10GEs. While this would not be historically ideal for adoption, especially considering all the additional costs and inconveniences of changing out technology, it would be significantly more attractive for 100GE adoption than today's situation in the U.S. and worldwide, in which the cost ratio scenario varies typically from well over 10:1 (it being more expensive to buy 100GE than ten 10GEs with similar bandwidth) down to with some carriers at least on some routes as "good" as 7:1.

UHB Ethernet is primarily a long-haul phenomenon thus far, inter-city routes being where the greatest increments of transmission capacity are needed. It will take longer to get deeply into metro networks where its economics make less obvious sense, Europe appears a bit ahead of the U.S. in terms of adoption of UHB Ethernet by competitive players, as that continent has been generally with Ethernet services.

40/100G Ethernet Services Forecast: Demand Will Hinge on Lower Costs reviews how U.S.-based and international carriers are addressing the UHB Ethernet market. It explores key issues in the adoption of 100GE and 40GE services, most importantly including equipment and service cost ratios with well-established 10GE, along with major adopters, market drivers and obstacles, opex savings, advantages of ICB offerings and the relationship between 100GE and 40GE services. It also includes brief discussions of the progress various carriers are making on these services, along with a market forecast of U.S.-based UHB Ethernet services.

Sample research data from the report is shown in the excerpts below:
Table of Contents (hri0713_toc.pdf)
The following excerpt presents our forecast of sales of UHB Ethernet service in the U.S. during 2012-2016. While adoption is relatively slow, the small size of the market means any significant adoption results in very high growth rates. Because 40GE has been more established longer albeit at a very modest level as of the first half of 2013, there are currently still more revenues attributable to it, though this will change soon as 100GE adoption grows quicker, more dramatically so as its key "cost ratio" with already dominant 10GE improves. Its adoption will primarily be by wholesale buyers, including carriers and largely Web-based content providers.
[click on the image above for the full excerpt]
Companies noted in this report include: AT&T Inc. (NYSE: T); Ciena Corp. (Nasdaq: CIEN); CenturyLink Inc. (NYSE: CTL); Colt Technology Services (LSE: COLT); EuroFiber; Infinera Corp. (Nasdaq: INFN); Interoute Communications Ltd.; KDDI Corp. (TYO: 9433); Level 3 Communications (NYSE: LVLT); Lightower Fiber Networks; LightPath Technologies; Reliance Globalcom (NSE: RCOM); Tata Communications Ltd. (NYSE: TCL); tw telecom (Nasdaq: TWTC); Verizon Communications (NYSE: VZ; Nasdaq: VZ); XO Communications LLC; and Zayo Group.
Total pages: 13
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