NPRG Insight: Ethernet Revenue Grows, But Some Providers Shine Bright While Others Fade
Metro Ethernet service has played a starring role on the telecommunications stage in recent years. New Ethernet installations are growing at a phenomenal rate and are generating revenue growth, while other services languish. This has created a dilemma for established carriers whose businesses were built on legacy service: is it better to chase these “growth” dollars, or to continue reaping healthy margins on older service, despite slowing (or declining) revenue? For providers operating without the burden of legacy infrastructure and services, the hard choice of others represents enormous opportunity. NPRG’s dynamic Continuous Information and Advisory Services (CIAS) updates coverage of providers on an ongoing basis, and the firm’s just-released Metro Ethernet Sector Analysis examines how these groups are faring in the Ethernet services market.
Annual Change in Total U.S. Ethernet Revenue, by Provider Category (2007-2008)
Source: New Paradigm Resources Group, Inc.
The figure above charts the year on year change in domestic Ethernet service revenue logged by each provider category. (Providers are grouped by their 2008 categorization, M&A activity is not discounted.) Fixed Wireless Providers recorded the largest percentage increase, a reflection more of their low 2007 baseline than anything else. CLECs and Cablecos achieved the greatest genuine growth in Metro Ethernet, outpacing even the strong gains made by fiber network operators (FNOs) and incumbent local exchange carriers (ILECs), which includes AT&T and Verizon.
Ethernet pure plays, a group dwindling through attrition and absorption into other categories via M&A activity, managed more modest increases. This group has been competing via Ethernet the longest and thus has a mature revenue baseline that mutes the relative impact of new growth. Our intensive company coverage and Metro Ethernet Sector Analysis also indicate that the novelty of the pure play model has worn off and Ethernet is now being harnessed as a growth engine for companies with more diverse businesses.
This, of course, only scratches the surface of the data and analysis contained in the Metro Ethernet Sector Analysis. But we also know that every vendor and provider in the industry faces its own particular pressures. What Ethernet information or forecasts would help your decision-making, but you can’t find anywhere else? In what ways do you view the carrier Ethernet space, and what tools would make your job easier? Are there particular companies you have difficulty finding information on? We’re always looking to present the data and analyses most relevant to your needs, so please let us know what you’d like to see in future reports!