Ethernet services thrive despite recession

A gloomy economy hasn't stopped the growth of the Ethernet services industry, as a new study from Infonetics Research finds that global revenues grew sequentially by 36% in 2008.

Overall, the study found that Ethernet service revenues totaled $16.9 billion last year and Infonetics says it expects revenue to double to $33 billion by 2013. In addition to strong Ethernet service growth last year, the study also found that global Layer 2 and Layer 3 IP MPLS VPN service revenue increased by 16% in 2008.

Infonetics analyst Michael Howard said that the current global recession is actually a reason more companies are adopting Ethernet and IP MPLS VPN services, as adopting those technologies will help them “increase efficiencies and reduce costs.” Infonetics says that Ethernet services on average cost between 20% to 30% less than frame relay or private line services, and the research firm also found that North American Ethernet services cost about one-third per megabyte less than DS3s or SONET services

“Organizations are looking to control WAN costs despite rising bandwidth needs by turning to Ethernet, a known cost-per-bit champion,” says Howard, who notes that companies are also adding managed Layer 2 and Layer 3 services because “service provider expertise and tools can help stabilize costs, prioritize critical applications and increase capacities.”

Although the Ethernet services market has continued to grow during the current recession, the market for Ethernet equipment is not expected to fare nearly as well. A report issued by the Dell'Oro Group earlier this year projected that the Ethernet switch market will undergo its steepest decline in eight years in 2009 and that the market for service provider routers would decline for the first time since 2002.