High equipment prices and unattractive comparative cost ratios have hindered adoption of ultra-high bandwidth (UHB) 40 and 100 Gbps Ethernet (GE) services, despite network and services providers’ growing bandwidth needs, according to a new research report from Heavy Reading. With relatively few customers as compared to 10GE, year-over-year growth in UHB 40/100 GE has been slower than anticipated. That said, there has been “a substantial pick-up of adoption” this year, Heavy Reading highlights.
A “radical” increase in demand for bandwidth, fueled by demand for video content, mobility and growing adoption of cloud computing services, is leading carriers and businesses across the value chain to boost bandwidth levels, but that hasn’t translated into rapid adoption of 40 and 100 GE – yet.
“100GE services are taking time to become the major and widely adopted market presence they will surely be,” according to the executive summary of Heavy Reading’s “40/100G Ethernet Service Update: Slow but Steady Progress.”
40/100 G Ethernet Demand
Heavy Reading forecasts that 100GE service sales in the U.S. will begin growing rapidly in the near future, increasing more than 10-fold from current levels to exceed $250 million in 2017.
High equipment prices, and hence, unattractive 100GE:10GE cost ratios explain why potential UHB buyers in the U.S. and some other countries continue to use multiple 10GE circuits rather than migrating to higher bandwidth levels.
The cost ratio between widely used 10GE and 1GE links have typically been around 2.5:1 as compared to a 100GE ratio of 6-7:1, according to Heavy Reading. That, combined with the expense, time and effort needed to make the required equipment changes is “discouraging adoption,” Heavy Reading says.
Competition among UHB Ethernet equipment providers, along with growing pressure on customers to boost bandwidth capacity, will drive a gradual decline in UHB Ethernet equipment prices “at unpredictable points over the next two to three years,” according to Heavy Reading’s report.
Though wholesale network carriers continue to be the primary customers for UHB Ethernet, Web 2.0 companies, along with financial and media enterprises, are growing players. Long-haul, inter-city service provision continues to be the primary use of UHB Ethernet, “particularly among wholesale, social media, content distribution and other Web 2.0 customers,” the market research company notes. In contrast, retail enterprise customers represent most of the demand for 40GE, most of that for in-metro network service provision.