2006 Top Ten: Heavy Findings
Herewith are the heaviest of our Heavy Reading findings for the calendar year 2006:
10. The bandwidth glut is over -- for real
Operators have made it crystal clear that they're out of capacity in their optical networks, and they need more bandwidth fast. Peer-to-peer traffic, video, and Ethernet services are chewing through data at an unprecedented rate, from metro to core optical networks. In surveys conducted by Heavy Reading, 80 percent of operators polled worldwide said they already have begun expanding or will start to expand their core optical networks in 2007, and when they do it won't always be simple route-by-route upgrades with needed line cards. Plenty are telling us they need the added capacity and cost efficiencies of new DWDM systems. This is good news for vendors, who will see double-digit growth rates for core optical gear in 2007. (See Optical's Future Looks Brighter.) Full details on the upcoming optical expansion will be available in a Heavy Reading report by Chief Analyst Scott Clavenna to be published in January.
9. Sonet and SDH are on their way out -- for real
Although they've been on a death watch to rival that of Generalissimo Francisco Franco and K-Fed's Kareer, these venerable workhorses of the transport network have managed to stay alive long past their prime, thanks to their tried and true robustness, a massive installed base, and enhancements to better handle packet traffic. (See IPTV Delays Could Hurt ROADM Deployment.) In 2006, we saw the first real signs of Sonet/SDH abandonment. As chronicled in a number of Heavy Reading 2006 surveys and reports, including "ROADM & WDM Worldwide Market Forecast, 2006-2011," operators are adamant that the future of their transport network is in the hands of Ethernet, OTN, and DWDM, a combination of technologies that together deliver all the robustness and performance of Sonet/SDH, without any of the voice-era limitations. The MSPP will be around for a while, but a new class of transport gear is coming, and this time it is going to be fully standardized, practically designed (read: no routing, ATM, multiple switch fabrics) and tied to the ongoing evolution of the access network from circuit to packet, narrowband to broadband, TDM to Ethernet.
8. Backhaul will remain a sweet spot for equipment suppliers
Wireless network operators of all types are increasing their spending on technology to improve the backhaul connections that link their base stations to their core network infrastructure, and this trend is likely to continue for the foreseeable future. (See HR: Backhaul Is Booming.) As Senior Analyst Patrick Donegan noted in his groundbreaking 2006 report, "Backhaul Strategies for Mobile Carriers," wireless operators have been approving hikes of 15 percent to 25 percent in annual backhaul expenditure to get enough capacity out to their base stations for a high-quality HSPA or 1X EV-DO end-user experience. Operators in mature markets are hoping they can get backhaul spending back down again to previous levels within 18 months or so of launching HSPA or 1X EV-DO, but that projected trend depends on developments that are far from assured. 7. The VOIP opportunity for cable MSOs in business services is large -- but so far the cable guys haven't seemed to figure that out
Our survey of enterprise users, presented in the report "Cable vs. Telcos: The Battle for the Enterprise Market," showed that businesses of all sizes view MSOs overwhelmingly as a viable provider of VOIP services -- but MSOs have yet to dedicate resources to the business VOIP market. So far, they are wasting the opportunity. (See Report: Enterprise Market Ripe for Cable.)
6. Cable companies are fearing -- for the first time in their history -- telco TV
Specifically, it is Verizon's FiOS service -- which combines cable's proven broadcast architecture with the capacity of fiber that is causing concern in cable boardrooms. (See MSOs Fight IPTV With IPTV.) Retrenchment from business services plans to protect their consumer customer bases and acceleration of plans to boost network capacity can both be attributed, in part, to the rise and early successes of FiOS. Cable's fear factor regarding telco TV is explored in depth by Senior Analyst Sterling Perrin in "Cable Next-Gen Video Plans and the Future of IP."
5. The telecom world is committed to a high-fiber diet, but some markets are more committed than others
The number of fiber-connected homes grew by almost 100 percent to reach 12 million by the end of 2006 and is well on target to hit over 100 million homes by 2012, reports Senior Analyst Graham Finnie in "FTTH Worldwide Market & Technology Forecast, 2006-2011." Almost 50 percent of the current total connected homes are in Japan, where household penetration will soon hit 20 percent. In Europe, by contrast, penetration is less than 0.5 percent. This unequal availability will continue, putting pressure on regulators and incumbents to act to correct it. (See FTTH Hits Mainstream.)
4. IMS = FUD
Heavy Reading surveys show consistently that telcos believe IMS will enable them to deploy more and better revenue-generating applications, and at lower cost. However, there are significant gaps in the standards in areas such as service creation, controversy over the relationship between real-time SIP-based IMS, and Web services. Add in a confusing medley of potential suppliers and integrators, and it's easy to understand why operators get woozy with angst when talk turns to IMS. Though IMS still has great promise, more work will be required if it is to become one of the prime applications generation machines in the next decade. Graham Finnie and Senior Analyst John Longo offer a complete analysis of IMS's market impact in Heavy Reading's newest reports, "IMS & the Future of Softswitches in Next-Gen Networks" and "IMS Application Servers & the IMS Applications Environment."
3. Pop goes the WiFi -- at least in the U.S.
European carriers such as BT and Golden Telecom are the furthest advanced in building out metropolitan WiFi networks. International markets outside North America will account for 58 percent of wireless mesh equipment shipments in 2008. These findings are important because they suggest that the North American municipal WiFi "bubble" is in the early stages of bursting although they also confirm that there is robust demand for wireless mesh equipment in international markets. Heavy Reading's new "Wireless Mesh Equipment Market Tracker" provides an in-depth view into this emerging product sector.
2. VOIP peering is reshaping telecom network interconnect
The accelerating migration of service providers and enterprises to VOIP peering platforms is having a profound and permanent impact on the economics of telecom network interconnect, resulting in the disintermediation of a number of operators from once-lucrative businesses. By eliminating the need for many of the middleman functions, VOIP peering will dramatically change the role of wholesale service providers in the interconnection process as well as the role of retail service providers for enterprises, notes Senior Analyst John Longo, author of "VOIP Peering & the Future of Telecom Network Interconnection." Since carriers can directly interconnect much more easily with VOIP a lot of the value provided by wholesalers in the past is eliminated. The result will be a movement from the role of a minute reseller to an interconnection facilitator. Sounds important. 1. Carrier Ethernet is... hot
Worldwide sales of carrier Ethernet switch/routers rose 9 percent in the third quarter of 2006 and remain poised to break the $1.4 billion mark for 2006, according to the latest edition of our Carrier Ethernet Switch/Router Quarterly Market Tracker service, created and maintained by Senior Analyst Stan Hubbard. The world's largest operators and hundreds of other service providers have embraced carrier Ethernet as a service and network convergence technology of choice, and they've been ramping deployments in a big way over the past 18 months. (See HR Awards Ethernet Leaders.) Operators will be pouring billions of dollars into carrier Ethernet access, transport, and service switching equipment in the coming years as they continue to transition away from traditional Sonet/SDH and ATM networks toward Ethernet and IP/MPLS. Heavy Reading's research suggests equipment vendors that provide a full suite of carrier Ethernet platforms or at least partner with others as part of an integrated solution will be best positioned to capitalize on the promising market growth opportunities.
— The Staff, Heavy Reading