AT&T, BT's TDM-to-IP migrations to drive new copper, fiber-based Ethernet deployments, says Infonetics

AT&T (NYSE: T), BT and other traditional telcos' move to migrate more of their customers off TDM-based T1 and E1 access to IP-based services like Ethernet is expected to create a bountiful market opportunity for EFM (Ethernet in the first mile) bonded copper and fiber Ethernet access devices (EADs) vendors.

According to Infonetics, worldwide Ethernet access device (EAD) revenue rose 11 percent in 2013 over 2012, to $958 million, due to improving economic conditions in Europe and Japan. From a vendor perspective, the five dominant EAD companies continue to be Actelis, Adva, Ciena, Overture and RAD.

"A number of major operators around the world--Deutsche Telekom, BT, and AT&T, among others--are starting to make end-of-life plans for customer TDM connections such as T1s and E1s, and Ethernet services are the main replacement technology for TDM," said Michael Howard, principal analyst for carrier networks and co-founder of Infonetics Research.

Howard added that "this bodes well for EFM (Ethernet in the first mile) bonded copper and fiber Ethernet access devices (EADs), on which we expect operators to spend a cumulative $5.6 billion worldwide over the five years from 2014 to 2018."

Besides AT&T and other incumbent telcos, copper-based Ethernet continues to become a larger factor amongst both large incumbent telcos and CLECs such as Integra, MegaPath, TelePacific and XO.

Service providers' overall spending on copper-based EADs totaled $283 million in 2013, a factor that Infonetics says illustrates "copper's important but limited role for Ethernet services."

AT&T, for example, revealed in a March FCC filing that it expanded the availability of its Ethernet service in legacy TDM T-1 service markets. At that time, the service provider said that it was developing and positioning Ethernet products in four markets and expanding its Ethernet footprint where it currently has local copper-based T-1 customers. Some of these products include AT&T Switched Ethernet (ASE) over fiber, ASE over Lightspeed/U-verse and ASE over Copper.

Similarly, Verizon (NYSE: VZ) said in 2012 that it plans to drive more of its business customers off of the legacy frame relay and ATM-based networks to its all-IP network. At that time, the service provider said that it had given those customers an end date where they either have to convert to an IP platform or work with another service provider to get their service.

While service providers continue to sell Ethernet over TDM (EoTDM) bonded circuits as a way to combine several E1s or T1s in logical bonding, the segment continues to decline.

Per the trend seen in earlier quarters, AT&T and Verizon reported that declines in legacy T-1 and Frame Relay access continued to be a drag on first-quarter 2014 business revenues.

AT&T reported first-quarter 2014 business services revenues declined 2.7 percent to $8.7 billion, while declines in legacy products like ATM and Frame Relay were partially offset by continued double-digit growth in strategic business services like cloud and Ethernet. Likewise, Verizon reported that Global Enterprise Strategic enterprise revenue declined 4.4 percent to $3.6 billion, while strategic service revenue rose 1.8 percent to $2.1 billion.  

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