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Companies Ditch ATM, Frame Relay -- Finally

Out with the old (frame relay, ATM and subscriber lines) and in with the new (e.g., Ethernet or IP MPLS VPN services). That's the latest trend in enterprise networking, according to market watcher Infonetics Research.

The upshot, Infonetics said, is that after years of talking about eight-sixing their legacy frame relay assets, organizations are finally doing it.

Worldwide Ethernet service revenues grew by fully one-third (33 percent) to $12.5 billion last year, while IP MPLS VPN revenues increased by one-fifth (20 percent), reaching $13 billion. That's just the beginning, according to Infonetics, which projected strong growth through 2011.

"Customer demand and IP and next-gen network...transformation projects are the two main factors contributing to the growing popularity of Ethernet and IP MPLS VPN services," said Michael Howard, Infonetics principal analyst, in a statement. "Companies like these services because they offer considerably more bandwidth with little or no increased WAN costs compared to their legacy counterparts" like frame relay, ATM, or private lines.

"Customers expect -- and get -- a better per-bit cost for Ethernet services. And service providers like them because they help bring in new revenue, so requests for Ethernet and IP MPLS VPN services are coming from both sides."

Not surprisingly, Ethernet's value proposition is hard to beat. Prices vary considerably, Infonetics conceded, but -- in North America, at least -- 100M Ethernet clocks in at about $50 per Mbps (for 100M Ethernet), while DS3 or SONET costs more than three times as much ($180 per Mbps).

Last year, 80 percent of Ethernet service revenues stemmed from retail sales, according to Infonetics, a trend that will continue through 2011: All sources of retail Ethernet service revenue -- including Internet/WAN, Ethernet private line and transparent LAN -- will increase. Over the same period, Infonetics predicted, transparent LAN services will notch the fastest overall growth.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.

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