The North American wholesale SONET services market totaled $1.66 billion in 2004 and could reach $2.20 billion in 2012, according to a recent report by Frost & Sullivan.
Revenues have shown a positive upturn, the Palo Alto, Calif.-based consulting company said, due to strong demand across all customer segments. In particular, the company attributed the demand to wireless carriers and the price stability brought about by ongoing consolidation among telecommunication carriers.
The company cautions, however, that customer migration from SONET to Ethernet is likely to increase due to the continuous development of Ethernet standards as well as the rising share of packetized traffic such as VoIP and data in the traffic mix.
Factors driving the demand for wholesale SONET services include rising broadband connectivity, wireless backhaul needs and bandwidth demand. "SONET's reliability and maturity as a technology as well as its extensive installed base is likely to continue to ensure its position as the preferred private line service in North America," Maria Zeppetella, a Frost & Sullivan senior analyst, said in a statement.
Frost & Sullivan reports that while there are many segments with strong growth opportunities, some of the fastest growing are wireless carriers for backhaul needs, as they seek to accommodate increasingly vast amounts of voice and data traffic at their POPs. Wireless carriers are also migrating from digital signal level one (DS-1) and digital signal level three (DS-3) to optical carrier level signals. Also, CLECs are continuing to add on lines and also have similarly increasing bandwidth demands as they provide greater amounts of voice and data as well as video to their customers.
On the flip side, competitive service offerings in Ethernet/Gigabit Ethernet are likely to prove a major challenge for the wholesale SONET services markets. Frost & Sullivan reports that while the standards for metro Ethernet continue to progress and service providers still provision Ethernet over SONET, native Ethernet services are likely to encroach upon SONET's market share in the coming years.
"Ethernet's lower prices in comparison to SONET's, its suitability for data transport and the convenience of incremental bandwidth provided by the technology are some of the key factors driving the growth of Ethernet services in metro networks," Zeppetella said. She added that although SONET won't be entirely displaced for many years, there is a clear shift taking place. "The early stages are appearing in the access network, where new builds are being designed around Ethernet over SONET and switched Ethernet."
Service providers need a smooth migration path as customers move away from SONET and to Ethernet. Wholesale providers, Frost & Sullivan say, will increasingly compete on quality, range of services and speed of delivery, and real-time provisioning and maintenance — as opposed to offering low-cost transport
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