Internet Traffic Driving Demand for Service Provider Networking Gear: Ovum

The Asia-Pacific region could overtake North America as the top market for service provider switches and routers, according to Ovum’s latest report.

Skyrocketing Internet traffic will fuel demand for switches and routers in service providers' networks, according to new numbers from market research firm Ovum.

In a report released March 19, revenues in the global service provider switching and routing market will jump from $13.3 billion in 2010 to $20.5 billion by 2017, thanks in large part to Internet traffic that is being driven by the growing popularity of connected mobile devices, demand for such bandwidth-hogging consumer applications like video, and rising subscriber penetration in fixed and mobile broadband networks.

And it€™s going to cost carriers if they want to keep their customers, according to David Krozier, principal analyst of network infrastructure at Ovum.

€œCarriers will need to invest in growing their IP infrastructure or risk losing subscribers,€ Krozier said in a statement. €œIn developing nations, carriers are building out their 3G wireless networks, while developed nations are investing in LTE [Long-Term Evolution] to accommodate mobile bandwidth demand.€

Service providers will be pressured by the bandwidth demand in the coming years, according to industry observers. Analysts at IDC in a March 14 report said broadband traffic over fixed networks will jump 50 percent every year over the next three years, while traffic over mobile networks could essentially double every year into 2015.

They pointed to so-called €œpower users,€ who are eating up a disproportionate share of the bandwidth.

"The enormous growth in end-user demand for both fixed and mobile broadband services is staggering," Matt Davis, director of consumer and SMB telecom services at IDC, said in a statement when the report was released. "Despite enormous growth projected in IDC's forecast, it is difficult to overestimate this phenomenon. Fixed and mobile operators will have to deal with a new reality that will tax network resources to the limit€”and perhaps past the limit."

IDC analysts are predicting that global end-user demand for data will drive wired and mobile broadband traffic from the 9,665 petabytes per month in 2010 to 116,539 petabytes a month in 2015.

They also saw similar trends to those mentioned by Ovum€”consumer applications like video streaming and Web browsing driving the demand, and that as broadband capacity increases, so does usage.

Other industry organizations also are forecasting rising levels of Internet traffic. Networking giant Cisco Systems last year said that global Internet traffic will reach 966 exabytes per year by 2015, and that the growth alone between 2014 and 2015€”about 200 exabytes€”would be more than the total amount of Internet traffic seen globally in 2010.

They also noted that by 2015, there will be 15 billion network-connected devices€”including PCs, smartphones, tablets and appliances€”worldwide.

Ovum analysts said that for now, North America was the largest region last year for switches and routers for the service provider market, followed closely by the Asia-Pacific region, which contains two of the world€™s top three economies in China and Japan. However, with 9.7 percent growth in the Asia-Pacific region expected for 2012, compared with 4 percent growth in North America, the Asia-Pacific this year could become the largest market for service provider switches and routers.