U.S. business spending on communications services will be lead over the next four years by business Ethernet services, principally Gigabit Ethernet, stemming from ongoing growth in cloud computing, according to the latest market review by the Telecommunications Industry Association.

Notably, data communications spending is growing at an escalating rate. Where in 2012 enterprise data communications spending will grow about three percent, rates will increase every year, reaching nearly six percent annual growth in 2016.

Cloud computing seems to drive much of the increased spending, as enterprises essentially “outsource” applications from local servers to cloud-based data centers.

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Lower costs are making new cloud-based applications economically feasible, causing new cloud services to proliferate, TIA says. That growth in cloud services, in turn, is generating a surge in data center traffic, which then requires higher-bandwidth networks
to accommodate that traffic. That, in turn, drives adoption of Ethernet for enterprise access.

Spending on all data communications services in 2015 will total an estimated $39.6 billion, up 4.5 percent compounded annually from $33.2 billion in 2011, according to the forecast.

In the data communications services market, growth in cloud services is driving data center traffic and boosting demand for networks that can handle that traffic, a new study by the Telecommunications Industry Association confirms.

Companies are trading up to business Ethernet as cloud computing and high bandwidth connectivity to data centers are increasingly in demand.

Also, for enterprises with less extensive bandwidth requirements, Internet protocol virtual private networks (IP VPNs) are gaining share at the expense of frame relay and asynchronous transfer mode (ATM), both of which are falling precipitously.

IP VPNs offer greater flexibility, lower costs and ready access wherever there is an Internet connection, TIA says.

Leased lines are maintaining a major presence, as they are used in dedicated IP VPNs, a growing component of the market. Data services as a whole rose 1.8 percent in 2011, TIA adds.

Beyond cloud access, in the United Kingdom, where communications regulators are requiring construction of a national wholesale high-bandwidth network, Ethernet is mandated as part of the network design.

Also, much of the growing demand near term is driven by mobile backhaul. In 2012, Ethernet based mobile backhaul accounts for 40 percent of physical connections of all types of mobile backhaul in the world. It’s projected to be 95 percent of the mobile backhaul connections market by 2015.

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