Ethernet Services Revenue Still Growing Strong

As we look forward to Light Reading's flagship Ethernet Expo 2008 in New York this coming October, I thought it might be useful to do a quick review of revenue growth rates for Ethernet enterprise services, which will be discussed extensively during the event.

Heavy Reading's worldwide surveys of operators have consistently revealed that Ethernet business services are among the fastest-growing segments of their data communications portfolios. The latest news from key players suggests that the market is still going strong, although the law of large numbers is beginning to make growth look more modest than the 25 percent to 100 percent rates characteristic of 2005-2007.

  • Optimum Lightpath : Carrier Ethernet innovation leader Optimum Lightpath reported that corporate revenues grew 20 percent year-over-year to $61 million in the second quarter of 2008. Lightpath said that rapidly growing Ethernet services more than made up for a decline in legacy data sales, so we are talking about an Ethernet growth rate above 20 percent. Lightpath also reported that more efficient, higher-margin Ethernet services were principally responsible for driving operating income improvement.

  • tw telecom inc. (Nasdaq: TWTC) (formerly Time Warner Telecom): At the forefront of the North American Ethernet services market for several years, tw telecom reported that its data and Internet services revenues grew 24 percent year-over-year to $97 million, due primarily to strong demand for Ethernet and IP-based solutions. tw telecom reported that about two thirds of its enterprise revenue was derived from customers that need connectivity in multiple locations.

  • KDDI Corp. : Japan-based KDDI reported that its wide-area Ethernet services revenue grew 16 percent year-over-year to $165 million (¥17,484 million) in the first quarter of its fiscal 2009, ending in June 2008. Ethernet progress outpaced the 10 percent growth of IP VPN services and contrasted sharply with a 10 percent decline for traditional leased data circuits. KDDI's Ethernet services revenue in the June 2008 quarter was nearly twice as much as its IP VPN revenue and 50 percent greater than its leased circuit revenue.

  • NTT Communications Corp. (NYSE: NTT): NTT's growth story for Ethernet, IP VPN, and legacy data services revenues tracked directionally with KDDI's in the June 2008 quarter. NTT reported that wide-area Ethernet services revenue grew 9.5 percent year-over-year to $129 million (¥13,682 million), IP VPN services revenues grew 4 percent, and leased data circuit services revenues declined 7.5 percent. But IP VPN and leased circuit services each still generate more revenue than Ethernet for the operator.

  • Colt Technology Services Group Ltd : Pan-European operator COLT – which recently launched phase 1 of its carrier Ethernet-centric next-generation network deployment – reported that Ethernet demand helped fuel 13 percent year-over-year growth in corporate data services revenue (measured in constant currency).

Ethernet Expo attendees will have the opportunity to hear directly from many Ethernet service providers about their revenue growth and network infrastructure plans, including Level 3 Communications Inc. (NYSE: LVLT), Global Cloud Xchange , Time Warner Cable Inc. (NYSE: TWC), Optimum Lightpath, and others to be announced soon.

— Stan Hubbard, Senior Analyst, Heavy Reading

Interested in learning more on this topic? Then come to Ethernet Expo 2008, a conference and exposition examining the latest trends in the carrier Ethernet market. To be staged in New York, October 20-22, the conference will also host Light Reading's third annual Ethernet Service Provider of the Year Awards for North America. Admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.

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