- Company spending remains measured through 2013. Uncertainty associated with the government’s fiscal plans – and anemic economic growth – will inhibit many major expansion plans in 2013. At the same time, as many companies amass corporate profits – and borrowing remains cheap – some businesses will invest in telecom improvements in the name operational efficiency. Overall, ATLANTIC-ACM expects total wireline telecom spending (excluding cloud, datacenter, and managed services) to decrease approximately one percent in 2013.
- Ethernet availability expands: The availability of Ethernet will continue to grow as companies build fiber to more buildings. Incumbent players’ (like Verizon) aggressive stances on eliminating copper end-office connectivity will further drive fiber adoption. In addition, the acceptance, speed, and availability of Ethernet over copper (EoC) continues to grow as most businesses do not have fiber built to their locations and EoC offers an alternative for easily scalable, economical, low-bandwidth connectivity.
- Ethernet DIA growth: Companies will continue to move to Ethernet for DIA services. Overall, the vast majority of circuits and revenue is currently derived from TDM services such as traditional T1 lines. Ethernet offers considerable discounts in price for speed (which drives migrations). In addition to cost savings, business customers are attracted to the scalability of Ethernet to help support ever-expanding future bandwidth needs. (As a general rule, customers like to see the word “Ethernet” in product offerings.)
- Customers continue to migrate toward VoIP products. On the low end, cablecocs and niche business VoIP players continue to take significant share from ILECs, driving small businesses from TDM lines to VoIP solutions. Small- and medium-sized businesses are shifting to hosted VoIP solutions for savings and additional unified communications (UC) feature sets. On the higher end, IP trunking is taking significant share away from traditional voice. Overall, VoIP represents 13 percent of the $30B business wireline voice market. This share will to increase to more than 30 percent by 2017.
- Service providers seek value-adds as margin boosters. As communication transport becomes increasingly commoditized, companies will continue to pursue differentiation and margin enhancement by expanding portfolios to add applications, enhanced interfaces, features and consulting services. (Think: Verizon’s acquisition of Terremark, CenturyLink’s acquisition of Savvis and Earthlink’s drive to offer IT services.) Look for more mergers of telecom providers with managed services, cloud services and software firms in the coming years.
- Cloud adoption drives greater demand for core products. Cloud computing has experienced significant growth but has yet to dramatically impact core telecommunications revenue. Companies will continue to move internal systems and data storage to the cloud. (This will be especially true for healthcare companies due to the transition to electronic medical records and data intensive collaboration.) Broadly speaking, cloud growth will translate to more bandwidth demand for carriers and more demand for data center space and services. IP VPN, Ethernet transport, and Internet access will experience growth effects but this growth will be mitigated by increased transport efficiency and greater competition for transport services connecting to large data centers and carrier-neutral colocation centers.
- Migration from traditional private line to Ethernet continues. Similar to Ethernet Internet access, growth in the market for Ethernet transport services will continue. About 35 percent of business data transport revenue (private transport excluding any Internet access, VPN, Packet or ISDN) was Ethernet in 2012, leaving a large, ongoing growth opportunity for Ethernet services.
- Cablecos continue to capture significant share in the business market. Cableco presence in small business is substantial, representing a greater-than-40-percent share of business broadband (including cable modem, DSL, and FTTP) revenue in 2012. That portion will continue to grow as operators leverage both competitive speed advantages over DSL and effective, localized sales forces and support teams. In 2013 and beyond, cable will continue to make plays in the medium business market, offering Ethernet DIA and transport. In coming years, cablecos will be disruptive further up market.
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