Private Line Market Starts Decline

After years of steady growth, the $34 billion private line services market is entering a period of declining revenue, says Insight Research. It could hardly be otherwise. Just as IP-based services are displacing TDM-based voice, so IP-based and Ethernet-based bandwidth services are displacing SONET bandwidth services, frame relay and ATM services.

U..S enterprises and consumers are expected to spend more than $27 billion over the next five years on Ethernet services provided by carriers, Insight Research predicts. With metro-area and wide-area Ethernet services now available from virtually all major data service providers, the market is expected to grow at a compounded rate of over 25 percent, increasing from $2.4 billion in 2009 to reach nearly $7.8 billion by 2014.

The decline in revenue will continue from 2009 to 2012. But Insight Research also believes private line revenues will tick up a bit after 2012, presumably as additional applications drive demand for more bandwidth. Why the growth would not come in the form of alternative IP bandwidth is not precisely clear, though.

Insight believes additional demand for wireless backhaul and video will lead to more buying of SONET products. Some of us would disagree, but we shall see.

"The transition away from frame and ATM will put a break on overall private line industry revenue growth for a couple of years," says Robert Rosenberg, company president . "However, private line demand remains strong for wireless backhaul, local bandwidth for caching IPTV video services, and for facilitating VoIP."