Carrier Ethernet Market Report: vCPE, Hybrid Cloud Increasingly Vital

In its September, 2015 Carrier Ethernet Survey, Heavy Reading highlighted the importance of hybrid cloud connectivity strategies, tension around increased price pressure (especially for Metro Ethernet), the crucial but unclear road toward virtualized service delivery at the network edge, and a growing focus on performance visibility as the future service differentiator.  

This global survey reflects current network and near-term projects and strategies from 68 communications service providers (more than half being Tier 1 operators). Respondents were predominantly network engineering and operations professionals or corporate managers. 

Among the survey’s findings:
  • Although nearly 70% of operators predict increased price pressures, 90% still expect revenue growth over all services.
  • By 2020, 98% of operators plan to offer hybrid cloud connectivity services.
  • Nearly 70% of operators view virtualizing and controlling network functions using vCPE as critical, and more than half plan to offer virtualized functions in 2016; yet, more than a third don’t have clear strategies for how to make this happen.
  • On-premises routers are being phased out in favor of NFV-based network interface devices (NIDs) to reduce footprint, deployment time, and cost.
  • The majority of operators favor hosting virtual network functions (VNFs) in data centers rather than on-site commercial off the shelf (COTS) appliances.
  • A shift is underway around what operators view as the main service differentiator: today, they say it’s end-to-end SLAs with performance guarantees, but 12-18 months from now predict it will be performance visibility.
  • Related to that last point, the majority of operators already offer real time performance reporting, and most of the rest plan to offer it by 2017. 
These findings are mostly consistent with MEF’s 2015 Carrier Ethernet Services Market Trends Report, published in September, based on a recent survey co-developed with Frost & Sullivan. 
MEF reported, for example, that more than half of service providers expect double-digit revenue growth across their Carrier Ethernet portfolios during the next 12 months. Further, respondents reported that, during the past year, the top four feature differentiators impacting customer buying decisions were service coverage, end-to-end SLAs with performance visibility, bandwidth scalability, and rapid service turn-up. These are expected to increase importance over the next 18 months, with bandwidth-on-demand also becoming a top five differentiator.     
Clearly, hybrid cloud connectivity and performance visibility are driving operator strategies, motivating the adoption of NFV-based vCPE solutions deployed at the network edge with virtual network functions (VNFs) hosted in data centers. 
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