(Accedian Networks') EtherNEWS Blog

The carrier Ethernet business is growing, with higher-capacity ports displacing lower-capacity ports, with pricing pressure relatively high, as a result.

Frost & Sullivan estimates the carrier Ethernet business at $595 million worth of revenue in 2009 and  $ 1.5 billion in 2014. But prices are unstable at the moment, the company says, with 1 GigE and 10 GigE prices dropping and demand for lower-speed ports declining.

“Wireless carriers were the single largest segment driving double-digit revenue growth for the Ethernet market in 2009,” says Frost & Sullivan Research Analyst Roopashree H. “Wholesale carriers saw great demand for Ethernet in both mobile backhaul and aggregation, and this trend will continue in the near future.”

As the wholesale Ethernet market migrates from low-speed ports to high-speed ports, particularly 1 GigE, the service will experience significant price declines, reducing overall market revenues. The price decline for high-speed ports – 1 GigE and 10 GigE – is expected to slow toward the end of 2011, leading to price stabilization in the market.

The emergence of carrier Ethernet exchanges will have a huge impact on the wholesale Ethernet market, providing a platform for carriers to connect to multiple carriers at other locations, argue analysts at Frost & Sullivan.

The reason is simple: bilateral agreements are time-consuming and cumbersome. Exchanges and collocation sites eliminate the work of negotiating and creating bilateral agreements by gathering scores to hundreds of carriers at a single physical location where simple cross connects are possible.