New forecast data released by telecom market research firm RHK shows edge IP aggregation routers as the primary growth segment in the switching and routing market over the next three years.
In its new report, RHK projects that the North American market for switching and routing will decline by 11% from $7.8 billion in 2000 to $6.9 billion in 2001. Despite the decline, edge IP aggregation routers are predicted to maintain positive growth, reaching $2.4 billion in 2001.
RHK’s Switching & Routing Forecast Report includes shipments for core IP routers and ATM multi-service switches, edge IP aggregation routers, session management systems, and service creation systems. The forecast does not include enterprise management systems.
The report details a number of factors that have contributed to the downturn in the market. Service provider bankruptcies and consolidation, reduced IT spending, and over production by system vendors have led to excess inventories and increased pricing pressure.
Additionally, Capex reductions shifted carriers’ priorities from new network deployment to maximum utilisation of existing assets.
‘Another contributor to the decline is the decreased rate of growth in Internet traffic,’ remarks Rosalyn Roseboro, Senior Analyst, Switching and Routing. ‘While the amount of Internet traffic continues to grow, the rate of growth has slowed down, leaving newly installed equipment underutilized.’
Over the next 12-18 months RHK expects this excess capacity to be absorbed. RHK analysts predict that modest growth will return in 2002, driven by demand for high-speed access and sustained demand for data services.
‘One bright spot in the midst of this economic shift is the growth we see with edge IP aggregation routers,’ comments Roseboro. ‘As enterprises deploy applications such as extranets, and use services such as managed hosting, their need for higher speed connections increases. We find that growth in IP aggregation routers is closely correlated to the growth in demand for higher-speed access. Additionally, these routers will be used to deliver value-added services, such as IP-VPNs.’