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40/100G Ethernet Service Update: Slow but Steady Progress
While bandwidth demand continues to escalate and carriers upgrade their networks accordingly for 100Gbit/s transmission, UHB (100G and 40G) Ethernet services sold by carriers are still a relatively modest presence, their adoption slowed primarily by continued high equipment (most notably, router) prices. The resulting high 100GE:10GE "cost ratio" keeps potential buyers using relatively attractively priced multiple 10GE circuits rather than migrating to the higher bandwidth level.

Standards for new UHB technologies were ratified by an IEEE working group in 2010. The IETF task force that created the standards designed 40GE primarily for within the data center, which remains where this intermediate speed is most commonly seen. 100GE will clearly be the primary UHB speed into the future, though there remains significant demand for 40GE among regional enterprise buyers.

100GE services are taking time to become the major and widely adopted market presence they will surely be. Despite radical bandwidth demand increases from video, the Internet, mobility, the cloud and more, this new generation of UHB services has only emerged modestly so far, slowed by high equipment prices and resulting unattractive "cost ratios" that largely keep enterprise and, to some extent, wholesale and Web 2.0 customers sticking with current multiple 10GE circuits. UHB (100GE and 40GE) services have grown since last year's report, though significantly less rapidly so far than anticipated. While there are still relatively few customers, there is a substantial pick-up of adoption under way in 2014.

While well-established 10GE offers a cost ratio of some 2.5:1 vs. its smaller cousin 1GE with a tenth as much bandwidth, 100GE may typically offer a 6-7:1 ratio on a pure service pricing basis for 10 times the bandwidth, while required equipment, particularly routers, makes ratios even higher, discouraging adoption, especially considering the additional costs of changing out technologies.

UHB Ethernet remains a predominantly long-haul, inter-city service, particularly among dominant wholesale, social media, content distribution and other Web 2.0 customers. More traditional retail enterprise customers, by contrast, account for most of the demand for 40GE and most of it is in- metro, where economics are less attractive overall. While the UHB market has been largely carrier wholesale, Web 2.0 players have become increasingly significant as buyers as have large financial and media enterprises.

100GE equipment prices will decline gradually at unpredictable points over the next two to three years, based on aforementioned competitive market forces. As they fall substantially over time, supporting wider adoption, we project U.S. 100GE revenues will reach $150 million annually in 2016 and $275 million in 2017, though 10GE will remain the dominant mainstream high-bandwidth level for enterprises for at least several years into the future.

40/100G Ethernet Service Update: Slow but Steady Progress reviews how both U.S.-based and some non-U.S.-based international carriers 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 also explores the relationship between the 100 and 40 bandwidth levels, the nature of the adopter population and other market drivers and obstacles. Finally, the report includes status reports on how various carriers are deploying and selling services and a market forecast of U.S.-based UHB services.
Sample research data from the report is shown in the excerpts below:
Table of Contents (hri0814_toc.pdf)
While 40GE is slightly longer established than 100G, the greater excitement and market interest is clearly going to the 100G space, though there are at least temporary niches of interest in 40GE, especially among retail enterprise customers regionally and within metro areas. But 40GE is likely to remain a niche. 40GE technology is commonly used within data centers, for which it was originally designed, but not in such cases usually requiring carrier services. The excerpt below summarizes the status of carrier UHB offerings.
[click on the image above for the full excerpt]
Companies covered in this report include: AT&T Inc. (NYSE: T); CenturyLink Inc. (NYSE: CTL); Colt Group S.A. (LSE: COLT); Eurofiber Nederland B.V.; Global Cloud Xchange Ltd.; Interoute Communications Ltd.; KDDI Corp. (TYO: 9433); Level 3 Communications LLC (NYSE: LVLT); Lightower Fiber Networks Inc.; Lightpath, a division of Cablevision Systems Corp. (NYSE: CVC); Tata Communications Ltd. (NYSE: TCL); tw telecom Inc. (Nasdaq: TWTC); Verizon Communications Inc. (NYSE: VZ; Nasdaq: VZ); XO Communications, owned by XO Holdings Inc. (OTCBB: XOHO); and Zayo Group LLC.
Total pages: 16
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