By Sean Buckley
Where do ILECs stand in the Ethernet space? All four of the largest U.S. telcos--AT&T (NYSE: T), Verizon (NYSE: VZ), CenturyLink (NYSE: CTL) and Windstream (Nasdaq: WIN)--continue to expand their Ethernet portfolios and reach for their customers.
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As seen in earlier entries in FierceTelecom's Ethernet series, these four incumbent local exchange carriers' rise in the Ethernet market is far from uniform.
At the top are AT&T and Verizon. Through their own brand names and aggressive network buildouts, they have become and will likely remain the two largest Ethernet players for the foreseeable future.
Not far behind are CenturyLink and Windstream--two service providers that for much of their existence operated as small-town telcos offering not much more than PSTN services.
CenturyLink became the third largest telco and Ethernet player when it purchased Qwest in 2011, while Windstream expanded its Ethernet and business services reach through key acquisitions such as PAETEC.
Here's a breakdown of the key players:
AT&T: The Tier 1 carrier built a sizeable Ethernet footprint that leverages a mix of its traditional copper and fiber networks. Of course, AT&T continues to weather some legacy-to-Ethernet IP service growing pains. In Q4 2012, the telco's business service revenues declined 2.3 percent year over year, but were up slightly sequentially as declines in legacy services like Frame Relay and ATM were partially offset by growth in strategic business services, including Ethernet and IP VPN. During the quarter, strategic IP-based business services grew 10.6 percent year over year and total business IP data revenues grew 2.4 percent year over year, illustrating the ongoing transition from legacy services to next-gen data services. Due to economic uncertainty and slow government and business sales, overall business revenues declined 2.1 percent to $9.1 billion year-over-year, but rose 0.6 sequentially from Q3 2012.
Verizon: Like AT&T, Verizon continues to feel economic pressure in its business accounts, particularly in Europe and the United States. In Q4 2012, the telco' global enterprise revenues declined 2.1 percent year-over-year to $3.8 billion in the quarter. Despite the overall decline, the sale of strategic services, including Terremark cloud and data center services, security and IT solutions, and Ethernet, increased 5.3 percent compared with Q4 2011. As a provider to a number of large domestic and global businesses, Verizon will continue to leverage its strong brand recognition and vertical-specific solutions for healthcare and manufacturing to drive more of its Ethernet services into the market.
CenturyLink: According to a recent Vertical Systems Group report, CenturyLink is the fastest-growing Ethernet provider in the United States. Driven by next-gen products such as MPLS and Ethernet, strategic Enterprise Markets – Network revenues were $346 million in Q4 2012, up 7.8 percent over Q4 2011. Overall revenues for the segment were $671 million, an increase of 5.7 percent from fourth quarter 2011, reflecting what it said was growth in high-bandwidth offerings and data integration revenues. One of the key highlights of this division's growth in Q4 was Ethernet services, particularly Ethernet over Copper. The telco has expanded its EoC footprint 80 percent to "over 700 Ethernet-enabled central offices."
- Windstream: Through its targeted acquisitions of a number of smaller telcos and CLECs such as KDL and PAETEC, Windstream has built a sizeable Ethernet service base. Its ongoing focus on selling Ethernet access to IP VPN and Dedicated Internet Access (DIA) has continued to drive Ethernet. Overall data and integrated services revenues in Q4 2012 rose 9.5 percent over Q4 2011 to $398 million. The telco is not resting on its laurels, however. During the recent quarter, Windstream obtained the Metro Ethernet Forum's MEF 9 and MEF 14 technical certifications for its MPLS-enabled Virtual LAN services, giving both existing and new customers assurance that its Ethernet services are standards-compliant.
Regardless of their differences in approach, all of these players face a challenging economy that's slowed overall business service revenue growth.
Take a look at these ILECs' metrics in the following chart.
Also, please check out the other reports in our Ethernet ecosystem series: Level 3, tw telecom, other CLECs step up to Ethernet plate, EoC makes a new dent in Ethernet market, and Cable MSOs: A phoenix rising in the Ethernet industry.
Take a look at these ILEC Ethernet players' metrics in the following chart.