ARCHIVE | ID Number: ERAX-EU-DP-9906
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ATM Grows on the Back of the Drive for IP Services
17 June 1999 Ian Keene This Market Analysis summarizes European market share for multiservice cell-based WAN switches, ATM WAN switches and frame relay switches. Forecasts for multiprotocol label switching switches and multigigabit routers and an analysis of the market drivers are also included.
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# ATM Grows on the Back of the Drive for IP Services This Market Analysis summarizes European market share for multiservice cell-based WAN switches, ATM WAN switches and frame relay switches. Forecasts for multiprotocol label switching switches and multigigabit routers and an analysis of the market drivers are also included.

Table of Contents
Marketplace Description Multiservice Cell-Based Switch Market Share Dataquest Perspective

List of Tables
Table 1: | Multiservice Cell-Based Switch Market Share by Manufacturer, 1998
Table 2: | WAN, Europe ATM Switch Market Share, by Manufacturer, as a Subsegment of Cell-Based Switches, 1998
Table 3: | WAN, Europe Frame Relay Switch Market Share by Manufacturer, as a Subsegment of Cell-Based Switches, 1998

List of Figures
Figure 1: | Technology Solutions in European Backbone Networks, 1998-2003
Figure 2: | European Backbone Networks by Ownership, 1998

Key Business Issues What forces will drive market growth and future opportunities? How is the European market for CO remote access products changing? What technologies are influencing or emerging in the European market? Strategic Market Statements ATM will be the leading European backbone technology in 1999. Multiprotocol label switching networks will impact from 2000 onward. Marketplace Description [return to Table of Contents] Whether the subject is consumer Internet access or corporate LAN-to-LAN connectivity, today's developing WAN backbone networks will determine what is and what is not practical to achieve in terms of service delivery. With the number of European PC-based Internet seats nearly doubling in 1998, data traffic rapidly overtaking voice traffic within carrier backbones, and the emergence of mobile data and interactive set-top box markets, the opportunities for multiservice cell-based switches, gigabit and multigigabit routers are rapidly expanding. Some Internet service providers may survive by transporting bytes from one location to another, but the majority is eagerly looking toward higher-value IP services in an attempt to raise revenue margins. In addition, many European carriers are increasing their revenue in frame relay services, having to contend with SNA and voice-over-frame relay delivery as well as IP traffic. The incumbent carriers are also planning to extend their ATM service offerings to business customers and have "cash cow" X.25 services to consider. The nirvana of fully converged network for all voice and data needs is some time away for most carriers, with the needs of new service offerings often resulting in another overlay network. However, integration of these diverse network services is an important factor when carriers decide upon their network equipment strategies. Considering these varied requirements of service providers, it is not surprising that the equipment market is shared by several technologies (see Figure 1). Dataquest divides the multiservice cell-based switch market into several subcategories: ATM, frame relay and multiprotocol label switching (MPLS). In the service provider infrastructure, Dataquest estimates that ATM switches outsold routers in the network cores during 1998, but when the enterprise market is taken into account ATM is forecast to be the leading European WAN backbone technology by the end of 1999. MPLS is expected to emerge during the second half of 1999 and grow to a significant size from 2000 onward. Figure 2 shows European backbone networks by ownership for 1998.

Figure 1
Technology Solutions in European Backbone Networks, 1998-2003
[return to List of Figures]
Source: Dataquest (June 1999 Estimates)

Figure 2
European Backbone Networks by Ownership, 1998
[return to List of Figures]
Source: Dataquest (June 1999 Estimates)

Multiservice Cell-Based Switch Market Share [return to Table of Contents] In 1998, the top four manufacturers of multiservice cell-based switches retained their 1997 market rankings (see Table 1). Nortel was the best performer with 49 percent year-on-year growth. The market for ATM switches grew by 60 percent year on year, while the frame relay switch market experienced a relatively flat year with only 7 percent growth. Tables 2 and 3 show ATM and frame relay switch market share by manufacturer, as a subsegment of cell-based switches for 1998.

Table 1
Multiservice Cell-Based Switch Market Share by Manufacturer, 1998
[return to List of Tables]
Manufacturer | End-User Revenue ($M) | Market Share
Nortel | 351.8 | 34.3%
Cisco | 235.1 | 22.9%
Newbridge | 166.6 | 16.2%
Ascend | 71.1 | 6.9%
Alcatel | 32.6 | 3.2%
General Datacom | 28.2 | 2.8%
Datus | 25.1 | 2.4%
FORE | 21.7 | 2.1%
IBM | 7.9 | 0.8%
Ericsson | 5.6 | 0.5%
Others | 79.8 | 7.8%
Total | 1,025.6 | 100.0%
Source: Dataquest (June 1999 Estimates)
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Table 2
WAN, Europe
ATM Switch Market Share, by Manufacturer, as a Subsegment of Cell-Based Switches, 1998
[return to List of Tables]
Manufacturer | End-User Revenue ($M) | Market Share
Nortel | 162.6 | 26.6%
Cisco | 152.8 | 25.0%
Newbridge | 130.0 | 21.3%
Ascend | 34.2 | 5.6%
General Datacom | 28.2 | 4.6%
FORE | 21.7 | 3.5%
Alcatel | 16.7 | 2.7%
Datus | 15.0 | 2.5%
IBM | 7.9 | 1.3%
Ericsson | 4.9 | 0.8%
Others | 36.8 | 6.0%
Total | 610.8 | 100.0%
Source: Dataquest (June 1999 Estimates)
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Table 3
WAN, Europe
Frame Relay Switch Market Share by Manufacturer, as a Subsegment of Cell-Based Switches, 1998
[return to List of Tables]
Manufacturer | End-User Revenue ($M) | Market Share
Nortel | 173.2 | 44.3%
Cisco | 82.3 | 21.0%
Ascend | 37.0 | 9.5%
Newbridge | 36.7 | 9.4%
Alcatel | 15.8 | 4.1%
Datus | 10.1 | 2.6%
Others | 35.9 | 9.2%
Total | 391.1 | 100.0%
Source: Dataquest (June 1999 Estimates)
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Dataquest Perspective [return to Table of Contents] The European Internet infrastructure market experienced a growth in frame relay switches from 1995 to 1996, in what was otherwise a network of backbone routers. Cost was the driving issue, but network management features also became attractive. As Internet bandwidth expanded during 1998, ATM switches were deployed, driven by cost, developed standards and traffic management features. By the end of 1999, Dataquest expects that, while 100 percent of Internet access traffic will pass through routers, 70 percent of this traffic will also pass through at least one ATM switch. The majority of IP service providers understand the value in providing their customers with value-added services. The main drivers are to capture and retain valued customers, increase revenue margins and widen service portfolios. Service providers have to do this in a highly competitive environment, needing to control their infrastructure costs in a fast-expanding market. The most popular added-value IP services that have been targeted by service providers to date are virtual private networks (VPNs) offering Layer 2 functionality: remote access VPNs, LAN-to-LAN interconnection, managed intranets and managed extranets. Service providers are also considering the introduction of audio/video streaming, unified messaging and managed voice services. There is also increasing focus on application services, as service providers attempt to climb to the top of the value chain. Examples of application services range from remote-user backup to SAP application access for the small to medium-sized enterprise market. For the consumer market, a network infrastructure that can provide adequate levels of customer satisfaction for electronic-commerce applications is in demand. The service provider desire for added-value business IP services has created much interest in MPLS, a technology that takes attributes from router and ATM technologies. Dataquest has forecast high growth in MPLS switches, but considering that MPLS will also be run on backbone routers and is not fully compatible with ATM networks, Dataquest expects MPLS to play a role in future WAN backbones, without dominating them. The current WAN market is a diversity of technologies, and will continue to be so over the forecast period.

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