Strong Demand For Data Center, Cloud Services Boosting Europe's Carrier Ethernet Market

CEN Feature (Dec 16 2014) Frost & Sullivan

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   Europe's retail and wholesale Carrier Ethernet providers are benefiting from increasing demand for enterprise connectivity and the accompanying rise in data traffic. The uptake will rise as more and more cloud services are adopted across the region, according to Frost & Sullivan' s most recent analysis, European Wholesale Carrier Ethernet Services and European Retail Carrier Ethernet Services.

   Currently, the United Kingdom, Germany and France constitute the three largest European markets. However, Eastern European countries with "less mature" economies are achieving the fastest growth rates for Ethernet services, said Shuba Ramkumar, Research Analyst - Information & Communication Technologies, Frost & Sullivan. In particular, Poland and Czech Republic are exhibiting stable and strong demand, she added. 

   The analysis estimates that Europe's wholesale Ethernet services market, which earned $2.73 billion in 2013, is expected to reach $5.16 billion in 2018. In addition, the region's retail market revenues of $3.10 billion in 2013 are projected to hit $5.63 billion in 2018.

   The wholesale and retail markets are growing at about the same rate. The slight difference is the result of increasing wholesale Ethernet demand for mobile backhaul and implementation of Ethernet Access services from carriers' points-of-presence to customers' premises. On the other hand, the retail Ethernet services market for multi-point services faces competition from Layer 3 MPLS-VPN services, which is relatively more scalable and flexible, explained Ramkumar.

   Although both the metro and long-haul market segments will contribute to market revenue growth, the need for inter-city enterprise connectivity will spur faster growth in long-haul services.

   “Ethernet service deployments are on the rise as reliability and flexibility benefits make the technology ideal to power private cloud networks,” added Ramkumar. “In their continuing effort to enlarge network presence and reach more customer sites, Europe's traditional wireline carriers will remain a key wholesale customer group for Ethernet services vendors.”

   While the upside potential is large, those vendors face challenges such as price erosion/reduced revenues; slower uptake of services by companies still feeling the impact of the economic downturn, especially in southern Europe; and Layer 3 MPLS-VPN's potential to erode interest in retail Ethernet services.

   Ethernet services vendors that want to succeed in Europe's competitive environment must improve their economies of scale. 

   “Focusing on switched Ethernet services, acquiring regional competition, and offering converged services will help vendors consolidate their positions,” noted Ramkumar. 

   Additional strategies for success include developing extensive network presence, automating network services, and offering performance-monitoring tools. 

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