Dell'Oro: Service provider router market growth to level off by 2017

The core and edge service provider router market will level off by 2017 as the market reaches maturity, says a new Dell'Oro report.

What will drive the eventual leveling off of the router are three factors: the slowing of network traffic growth, lower equipment prices, and service providers finding more efficient ways to provision their networks.

Dell'Oro said that the service provider router market in recent years has grown 20 percent or more as network operators dedicated more of their capital dollars to routers designed to support Internet traffic growth. Over the five-year period between 2012-2017, the analyst firm expects router growth "to remain below 10 percent."

As has been the common trend, the core and edge service provider routing market will still be dominated by a few key vendors.  

On core service provider router side, it's still a two-horse race between Cisco (Nasdaq: CSCO) and Juniper (NYSE: JNPR). The vendors held almost 88 percent of the combined market share through the first quarters of 2012. Taking the third spot is Huawei with just under 10 percent.

"The core is already a mature market while the edge market has a number of mature or maturing applications such as residential broadband, IPTV, and business services," said Shin Umeda, VP of Dell'Oro in an interview with FierceTelecom

Alternatively, the service provider edge market has been more competitive with Cisco, Alcatel-Lucent (NYSE: ALU), Juniper, and Huawei accounting for more than 90 percent of the Q1 through Q3 2012 share.

While Cisco and Alcatel-Lucent aren't releasing their Q4 2012 earnings statements until later this month, Juniper reported that it is seeing continual demand from service providers for edge routing platforms. Cisco, however, has been revamping its focus on the core and edge networking market segments and software by selling off underperforming consumer business lines, such as the recent sale of its Linksys home networking business to Belkin.  

"The service provider edge is more competitive due to [a] wider range of applications and solutions, regional variations, and cross-technology solutions," Umeda said.

One application that will likely drive more router sales will be wireless backhaul.

Umeda said that while "mobile backhaul based on IP is an early stage application, we expect good growth (~10% 5-year CAGR) over an extended period (next 5+ years), rather than high CAGR (>15%) over shorter period (~2-4 years) that has historically driven the service provider router market growth."

For more:
- see the release

Special report: Wireline telecom earnings in the fourth quarter of 2012

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