Ethernet Access Market Update

Recent conversations with – and public comments from – key carrier Ethernet access platform (CEAP) vendors indicate that the global Ethernet-over-bonded copper pair platform market has been holding up relatively well in the midst of economic turmoil. Heavy Reading estimates the Ethernet-over-bonded copper pair market grew 80 percent year-over-year to $129 million for the four-quarter period ending in the third quarter of 2008. The market climbed 10 percent quarter-over-quarter in the third quarter and likely grew at a single-digit rate between the third and fourth quarters, based on initial feedback from leading suppliers. Detailed analysis of the market and vendor profiles can be found in Heavy Reading's latest Carrier Ethernet Access Platform Quarterly Market Tracker.

While operators worldwide are trimming capital spending budgets and/or delaying network infrastructure projects, the promise of a quick return on investment in a handful of months can make it easier to justify expenditures on Ethernet-over-bonded copper pair platforms vs. legacy access solutions. Market growth thus far has been fueled primarily by success-based Ethernet business services deployments by operators such as AT&T Inc. (NYSE: T), Cavalier Telephone Inc. , Magyar Telekom plc , and XO Communications Inc. , but vendors are also generating sales from mobile backhaul, DSLAM backhaul, municipal, enterprise, and military applications.

Heavy Reading estimates that Hatteras Networks Inc. led the Ethernet-over-bonded copper pair platform market with a 36 percent share in the third quarter of 2008, and feedback from the company indicates sales were quite strong in the fourth quarter. No. 2 Actelis Networks Inc. has a large and diverse customer base that has been underpinning its solid performance in recent quarters. No. 3 Adtran Inc. (Nasdaq: ADTN) has been generating Ethernet-over-copper revenue from Tier 1 and 2 North American operators. Adtran CEO Tom Stanton recently expressed optimism about the prospect of ramping sales of the TA 5000 multiservice access and aggregation platform used in Ethernet-in-the-First-Mile (EFM) applications.

Macroeconomic troubles will take a lot of wind out of the Ethernet-over-bonded copper pair platform market in 2009, but vendor feedback entering the year suggests there is a good chance the market could still grow at a low double-digit annual rate. One wild card is what happens with the broadband component of the economic stimulus package working its way through the U.S. Congress.

The economic stimulus bill that passed the U.S. House of Representatives in late January 2009 includes a provision for the Rural Utilities Service (RUS) to receive and administer an additional $2.83 billion worth of funding related to open-access broadband infrastructure. The House bill requires that at least 75 percent of the coverage area shall be in a rural area currently without sufficient access to high-speed broadband service. The bill calls for 50 percent of the grants, loans, and loan guarantees to be awarded no later than Sept. 30, 2009.

The stimulus plan currently being debated in the Senate includes a provision to make $9 billion in broadband technology funding available until the end of September 2010. The Senate version would require 50 percent of the funds to be used for projects in rural communities and says that part of this money may be administered by the RUS if deemed necessary by the Secretary of Commerce.

Hatteras, Actelis, Adtran, and Zhone Technologies Inc. (Nasdaq: ZHNE) all offer Ethernet-over-bonded copper pair products that are RUS-certified. It would appear that these suppliers have the potential to benefit from some of the increased spending on broadband infrastructure in predominantly rural areas.

— Stan Hubbard, Senior Analyst, Heavy Reading

For more information, or a FREE PREVIEW of the "Carrier Ethernet Access Platform Quarterly Market Tracker," please contact:

    Lee Salem
    Sales Director – Custom Research, Heavy Reading
    [email protected]

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