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F&S sees squeeze on SONET sales

New analysis from Frost & Sullivan (www.telecom.frost.com), North American Wholesale SONET Services, reveals that t...


April 13, 2005  


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New analysis from Frost & Sullivan (www.telecom.frost.com), North American Wholesale SONET Services, reveals that the total market generated revenue of US$718.7 million in 2004 and is expected to reach US$1.26 billion in 2010 at a compound annual growth rate (CAGR) of 8.3%.

Despite those numbers, Frost & Sullivan research analyst Vinod Ramanathan says increased competition, which has lead to price wars, is proving to be a major source of worry for carriers.

“The lucrative enterprise market represents a big portion of the profits for carriers, and such aggressive pricing only results in lower profit margins,” he says.

Price decreases have averaged at 12% and more on a year-on-year basis. Although reviving economic growth and increasing demand from the government sector are providing impetus to SONET services, these volume increases are being offset by falling prices.

At the same time, SONET services are facing a significant threat from IP VPNs and gigabit Ethernet offerings, which are finding growing favor with carriers. IP VPNs provide attractive alternatives with lower cost for transactions, the firm says.

Convergence and triple play are proving to be the new buzzwords in the industry. Equipment vendors and carriers are now focused on increasing the life of the legacy applications and building suitable bridges to help make convergence a reality and provide extremely reliable networks on demand.

“As triple play gains traction, it is imperative that SONET providers concentrate on optimizing networks to carry voice, data, and video,” says Ramanathan. “Going forward, the focus will be on designing, building, and managing future networks for customers.

“Nevertheless, with the rapid onset of the digital age, carriers can continue to find substantial growth opportunities. The wireless market is witnessing a massive increase in voice and data traffic, while the wireline market is seeing equally impressive growth rates for data services.

“With digital data traffic doubling approximately every year, the need to manipulate, store, and move data at lightning speed, connectivity is greater than ever before. Business on demand is here to stay, and this trend bodes well for the SONET services market.”