European Ethernet Services Market in Top Gear

IDC: The market for Ethernet services in Western Europe is booming. Spending increased by 42% in 2005 to reach $1,168 million. IDC forecasts it will grow to reach $3.4 billion by 2009, a CAGR of 30%. By that time, Ethernet will have overtaken traditional point-to-point leased lines and will represent over 20% of spending on all WAN services.

Demand for Ethernet is high due to its inherent benefits to enterprises: low cost per megabit, flexible and incremental availability of bandwidth, transparent connection of LANs already based on Ethernet, and suitability for voice/video/data convergence. An additional benefit for some organizations is that, as a Layer 2 service, customers can choose to retain their IP routing in-house for security or other reasons.

The vast majority of spending on Ethernet is currently for point-to-point services, primarily to replace existing leased lines. The highest growth, however, is in any-to-any Ethernet networks (primarily VPLS-based) that can provide high-bandwidth, fully-meshed Layer 2 services at low cost. The next development in this area will be interconnection between providers' networks, and the work of standards organizations in this regard is crucial in furthering Ethernet's potential as a wide area network service.

Ethernet is still targeted at large enterprises and the public sector. Nevertheless, as the market matures, Ethernet will appeal increasingly to smaller customers that have not previously been able to afford high-bandwidth services.

The Ethernet market has been driven to date by alternative operators, but some former PTTs are expanding their Ethernet services rapidly in response. To counter the cannibalization of their legacy services, PTTs are positioning Ethernet as a delivery mechanism for value-added and managed services.

Ethernet promises much, but has its limitations at present. There are still unresolved issues around interoperability between Ethernet providers and multiservice interworking standards that limit the ability to run Ethernet with other managed data services.

Market for Ethernet services in Western Europe Publ 20060308