VSG: AT&T remains the dominant Ethernet player, but cable MSOs, CLECs gaining ground

AT&T (NYSE: T) may be the dominant Ethernet provider, but according to Vertical Systems Group's latest U.S. Ethernet Leaderboard report, it is facing a growing challenge from cable operators and CLECs.

VSG mid year 2013 leaderboardThe research group said that for the first time the cable operator segment had more new Ethernet port installations than the incumbent carrier segment.

Although cable operators are regional in nature and often don't overlap with one another, they continue to find a sizeable niche serving both the in mid and small business sectors.

Once again, the two dominant cable MSOs in its top tier were Cox Business and Time Warner Cable. Making the Challenge tier on VSG's list were Charter Business (Nasdaq: CHTR), Comcast (Nasdaq: CMCSA), and Lightpath.

Comcast, through its aggressive marketing and network buildout, continues to make headway in the Ethernet and overall business market. During the first half of 2013, the cable MSO's business services unit generated more than $1.5 billion in revenue, up 26.9 percent over last year. Driven by Ethernet services, the mid-market portion of the business unit is growing at more than 50 percent.

Cable MSOs, says VSG, make up 20 percent of the total U.S. Ethernet port base. However, the Incumbent Carrier segment remains the largest, with 47 percent of total U.S. Ethernet ports, followed by the Competitive Provider segment with 33 percent of ports.

"For new installs, the cable MSO segment as a whole had more new ports installed in the first half of year than the incumbents did," said Rosemary Cochran, principal of Vertical Systems Group, in an interview with FierceTelecom. "It's still a relatively small port base overall, but it's less than half the size of what the incumbents have in the U.S."  

The growth of cable and CLECs is driving service providers to be more innovative with Ethernet pricing.

"Pricing has become even more aggressive because it can range so dramatically in a competitive market," Cochran said. "It's definitely market share driven as opposed to service driven where they can lock up a customer and having that upgrade capability with a fiber-based connection."

In the mid-year 2013 U.S. Ethernet Leaderboard, companies that made the top eight in rank based on port share were AT&T, Verizon, tw telecom (Nasdaq: TWTC), CenturyLink (NYSE: CTL), Cox, XO, Time Warner Cable (NYSE: TWC), and Level 3 Communications (NYSE: LVLT). During this period, XO moved up to the sixth position, while Time Warner Cable advanced to the seventh position and Level 3 dipped to number eight.

One area where incumbent telcos will continue to have the upper hand over cable and CLECs is in providing connectivity to private business clouds using Ethernet Private Lines (EPLs) and Ethernet Virtual Private Lines (EVPLs).

"The other issue is connecting to private clouds and VPNs, and that's where you're looking at the providers who are on the network service end and that leaves out a lot of the cable guys," Cochran said.

For more:
- see the release

Special report: Charting the Ethernet ecosystem

Related articles:
Level 3, tw telecom, other CLECs step up to Ethernet plate
CenturyLink, Windstream grow leadership roles in the Ethernet market 
Cable MSOs: A phoenix rising in the Ethernet industry