Infonetics' Carrier Switch & Router Forecast; "Carrier Ethernet Market is Booming"

Introduction:

On February 23rd, 2012 Infonetics Research released excerpts from its fourth quarter 2011 (4Q11) Service Provider Routers and Switches vendor market share report, which analyzes the IP edge router, IP core router, and carrier Ethernet switch (CES) market segments and the manufacturers within them.
That same day Infonetics co-founder & principal analyst Michael Howard led off the Ethernet Technology Summit – Market Research conference session with his Carrier Ethernet market assessment and forecast.

Carrier Router and Switch Market in 2011:

It was a record year for the carrier router and switch market in 2011, despite weakness in North America, according to Infonetics Research.
“The carrier router and switch market hit a record-high $14.5 billion in 2011, up 8% over 2010, making it the second largest telecom market segment after mobile RAN infrastructure,” notes Mr. Howard, Infonetics Research’s co-founder and principal analyst for carrier networks.

“Yet paradoxically, 2011 results show signs of a slowdown in the market’s overall growth rate,” Howard continues. “Why? Because despite continued double-digit percent annual growth in the largest market, Asia, and the smallest market, Latin America, the two mainstays of carrier routers and switches, North America and EMEA, are slowing. Still, the fundamental market drivers will pace the overall market forward, with growing fixed broadband traffic and exploding mobile broadband traffic on 3G and LTE networks pushing many service providers to upgrade their access, aggregation, and core networks, including mobile backhaul.”

North America was the only world region to post a decline in carrier router and switch spending both quarter-over-quarter in 4Q11 as well as for the full year 2011, despite the many economic growth signals in the U.S.  Meanwhile, EMEA had a seasonally typical budget increase, with a 21% pop in router and switch spending, despite a poorer year and the ongoing euro/Greece/debt crisis.  Ongoing network upgrade projects in South America and Mexico led to a banner year for service provider router and switch vendors in Latin America (revenue up 22% in 2011), and China and Japan propped up the market in Asia.

Service Provider Router and Switch Market Highlights:

  • The global service provider router and switch market, which includes IP edge routers, IP core routers, and carrier Ethernet switches (CES), grew 11% sequentially to $3.9 billion in the final quarter of 2011
  • In 4Q11, the IP edge segment (the sum of IP edge routers and CES), jumped 12% sequentially and is up 8% for the year.
  • Cisco continues to lead the IP Edge segment by a healthy margin, commanding about a third of the global market in 2011, while its top competitors — Alcatel-Lucent, Huawei, Juniper, and ZTE all gained market share in 2011.
  • Alcatel-Lucent’s strong performance propelled it into the #2 spot for global router revenue in 4Q11, and it retained #2 position for 2011 EMEA router revenue, despite not having a core router product.
  • Recent trends in the carrier router segment are indicative of the overall router and switch market: with the exception of 2009 during the height of the recession, router sales grew by double-digit percents each year until 2011, when they increased a relatively lower 9.9%.
Infonetics’ quarterly Service Provider Routers and Switches report tracks Alaxala, Alcatel-Lucent, Brocade, Ciena, Cisco, Ericsson, Extreme, Force10, Fujitsu, Hitachi Cable, Huawei, Juniper, NEC, Nokia Siemens, Orckit-Corrigent, Tellabs, ZTE, and other equipment companies. The report provides worldwide and regional market share, market size, and analysis for IP edge routers, IP core routers, and CES. The report tracks the IP edge by application, including multiservice edge, broadband remote access servers, Ethernet access transport, and Ethernet service edge.
For more information on this report, including Press and Sales contacts please see:

Carrier Ethernet Market Status and Forecast:

Global Ethernet Market - Image Courtesy of Infonetics

In mid November 2011, Infonetics Research increased its Carrier Ethernet equipment forecast to $40.2 billion by 2015.  At that time, the company stated they expect the global carrier Ethernet equipment market to finish 2011 up 15.7% to $32.0 billion, following a 30.5% hike in 2010.  Service provider investment in carrier Ethernet equipment continues to outpace overall telecom capex, which Infonetics expects to be up 6% in 2011.

The carrier Ethernet equipment market is being driven chiefly by the move to packet-based IP next-generation networks and growing consumer, business, and mobile backhaul traffic, particularly video traffic.  The carrier move to packet depends heavily on IP, MPLS, and Ethernet, as operators gradually move to use of Ethernet over Fiber and Ethernet over Copper transport instead of  SONET/SDH and DS1 or DS3.The largest carrier Ethernet investments are in routers, carrier Ethernet switches (CES), and optical gear, which together make up more than two-thirds of the total carrier Ethernet market.  Cisco leads the carrier Ethernet switch market with 45% of global revenue, with no close competitors. ADVA and Ciena lead the fast-growing global Ethernet Access Device (EAD) market.
Last week at the Ethernet Technology Summit – Market Research session, Michael Howard provided an updated Carrier Ethernet market assessment and forecast.  Here are the highlights:
  • Carrier Ethernet Equipment market is booming with $37.5B worldwide revenues forecasted for 2015.  The cumulative 2005 to 2010 CE market was $101B.

    Wireless Backhaul Moving to Ethernet - Image Courtesy of Infonetics
    Wireless Backhaul Moving to Ethernet - Image Courtesy of Infonetics
  • Ethernet dominates worldwide mobile backhaul carrier spending with $6.4B or 91% of the 2011 mobile backhaul equipment market (that’s Ethernet over copper, microwave or fiber between the cell tower and the long haul carrier/ISP point of presence, and on to the controller site and/or mobile switching center.  In 2012, Ethernet based mobile backhaul accounts for 40% of physical connections of all types of mobile/cellular backhaul (e.g., TDM, IP, etc) in the world. It’s projected to be 95% of the mobile backhaul connections market by 2015.
  • Network Operator Carrier Ethernet services (Ethernet Private Line, Virtual Private Line, Virtual Private LAN, Ethernet as access for IP VPNs) will be a $49B worldwide market in 2015. [this includes both retail and wholesale].  The cumulative 2010-2015 Carrier Ethernet market (total sales) is expected to be $93B.
  • Big growth is foreseen for CE: Routers, Switches and optical networking/transport (Ethernet over DWDM) equipment.  Ethernet over microwave growth is accelerating.
Comment:

After many years of slow growth, it’s great to see the Carrier Ethernet market now “booming.” Note that the MEF has been in existance for 10 years and that the IEEE 802.3ah Ethernet First Mile (EFM) standard was completed in 2003. Yet the Carrier Ethernet market really didn’t start to ramp till 2010 or 2011.

It is somewhat surprising that mobile network operators are using Ethernet based backhaul when they still have so much TDM based cellular voice (even though mobile data traffic has now eclipsed voice, it’s voice that pays most of the bills).  We see tremendous promise and potential for Ethernet over fiber backhaul for the exponentially growing 4G mobile data traffic.  That assumes that carriers like AT&T make good on their promise to bring fiber all the way to cell towers that handle significant 3G/4G mobile data traffic.

0 thoughts on “Infonetics' Carrier Switch & Router Forecast; "Carrier Ethernet Market is Booming"

  1. Nice summary, Alan. The Carrier Ethernet market seem like one of those overnight sensations that took 12 years. Every day, the demands of backhaul (e.g. this very connection I am using to send this comment) are increasing. The combination of fiber and Carrier Ethernet seems to have won out.

    Here is one of the independent carriers we recently visited and filmed that is using fiber Ethernet to serve wireless carriers; wireless carriers that ultimately are customer and competitor in that they provide wireless phone and data services that compete with the independent carrier’s own retail offering.

    http://community.calix.com/t5/Calix-Community-Blog/Calix-Innovation-Awards-FTTP-in-South-Carolina/ba-p/11784

    1. Thanks Ken. I’m still astonished the Carrier Ethernet market took so long to take off. Many, many start-ups focusing on that market from 2000-2004- chip & equipment companies as well as competitive carriers/service providers,etc went bankrupt or were sold for a pittance.

      I think it was mobile backhaul and competitive carrier/MSO Ethernet services to SMBs that finally kick started the Carrier Ethernet market in 2010- 2011. That was 7 or 8 years AFTER the IEEE 802.3ah Ethernet First Mile standard and MEF specifications were completed!

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