The Total Worldwide Service
Provider Carrier Router-Switch market is projected to increase from $11.9 B to
$15.4 B by 2018 (CAGR 5.3%). From a regional perspective, the Americas and APAC
will lead the growth as carriers respond to increases in data traffic, Big
Data, virtualization, software-defined networking and the unrelenting demand
for innovative and intelligent applications and services. The projected
five-year growth will be strongest (in order of growth) in North America (CAGR
+5.2%), APAC (CAGR +5.1%), LAM (GAGR 5.0%) and EMEA (CAGR +3.1%).
Carriers are focusing their CapEx
on the edge segment. Why? The edge has
significant impact on customers’ experiences and subscriber revenue. The edge segment, which is projected to
reach $12.1 B in 2018, dominates the router market and is 3X the size of the
core router market, which will increase $3.2 B in 2018. Driving edge growth is
1) the increase of bandwidth capacity of edge routers, 2) integration of
network service functions, such as video services, NAT, security and threat
management, 3) movement toward SDN, which approaches the network as an
amalgamate and configurable resource and 4) traffic being pushed to the
edge. Additionally, the cost of increasing bandwidth capacity in the
core and carriers running their core networks hotter, and thus utilizing more resources,
has pushed traffic to the edge.
Mobile backhaul is also driving
this edge growth; more people are connecting with multiple devices, which is
propelling operators to upgrade their backhaul networks with routers to support
mobile services based on LTE and HSPA+ technologies. Mobile operator CTOs have
been and will continue to focus on network cost economics, 3G-WiFi integration,
and carrier aggregation.
The core router market, which is
anticipated to grow to $3.2 B/5.4% by 2018, is also undergoing a transition.
Carriers are utilizing a combination of MPLS and optical switching to handle
traffic loads that are crossing the core and which do not require detailed
analysis. The advantage of adding optical switching to a packet switch for
carriers is twofold: this combination is more scalable, and time and costs
associated with converting traffic between electronic and optical platforms are
both reduced.
CapEx for the second half of this
year is looking positive and expected to increase 7% year over year. Key
drivers are LTE investment in mobility and Carrier Ethernet and 100G in the
wireline side.
In the next five years service
providers will continue to focus on monetizing emerging opportunities, which
will require networks that enable them to accelerate service innovation, scale
services, and expand the customers’ experiences, all within a viable economic
framework.
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