Week in research: OTN spending rises with 100G deployment drive; Private line market levels off

OTN spending driven by 100G deployments: As service providers move to upgrade their core networks to 100G coherent optical technologies it will drive more spending in three areas: optical transport network (OTN) switching, OTN transport equipment, and packet-optical transport systems (P-OTS). Despite being a slow year overall for optical network sales and revenue, the OTN transport and switching equipment market grew 8 percent in 2012, to $7.3 billion. The research firm forecasts that the OTN equipment market will exceed $13 billion in 2017. "OTN spending, and particularly OTN switching, is benefiting from a rise in investment in coherent core networks," said Andrew Schmitt, principal analyst for optical at Infonetics Research. He added that "Many service providers rolling out 100G are using the opportunity to upgrade their optical switching infrastructure" and in the metro network, service provider "investment is rapidly rotating away from legacy SONET/SDH to packet-optical transport systems that combine optical and Ethernet circuit switching in the same chassis." Release

Infonetics OTN market 2013

Private line revenue reaching a plateau: As more businesses migrate towards packet-based services such as Ethernet, the $35 billion U.S. private line services market will decline about 1 percent annually over the next five years, reports Insight Research. Although private lines will decline modestly, equivalent IP-based circuits will rise to support new cloud computing and video applications. "We have reached one of those unique periods where demand is rising yet revenues are in decline," says Fran Caulfield, Insight Research Director. "Price erosion and the shift to lower unit pricing at higher bandwidth tiers are to blame." Evidence of this trend is being seen every quarter at all of the major telcos such as AT&T (NYSE: T), for example. AT&T reported in Q4 2012 that 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. Release

Amazon takes charge of cloud services market: While there are certainly lots of definitions about cloud, new data from Synergy research revealed that cloud infrastructure service revenues grew 15 percent between Q4 2011. Amazon (Nasdaq: AMZN) continues to dominate the cloud infrastructure services market due to its market share in the high-growth Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) segments. The Internet giant dominates the IaaS segment, accounting for 36 percent of revenues, and is gaining on PaaS leader Salesforce's 19 percent market share. While Amazon trails Akamai and Level 3 (NYSE: LVLT) in the CDN/ADN segment, it holds number three spot with a seven percent market share. Meanwhile, in the managed hosting segment, Rackspace is the dominant player but faces growing competition from Verizon (NYSE: VZ) and NTT (NYSE: NTT), while Equinix (Nasdaq: EQIX), Savvis, and SunGard lead the colocation market. "There is a fascinating battle for market share developing,' said Synergy Research Group's John Dinsdale. 'Traditional telcos are strong in the more mature managed hosting segment, where they account for eight of the top ten operators, but their impact on the IaaS and PaaS segments has so far been muted. We have no doubts that they will more aggressively target those segments in the coming years." Article

Synergy cloud infrastructure leaders 2012