Private Line Market Research—Insight's research study of the private line services market belies all the obituaries written for this market over the years. Our analysis indicates that the $30 billion private line market is vibrant, and private lines growth remains strong while other segments of the industry barely hold their own.
Private line remains a staple for large public network providers and their large corporate customers, and data continues to increase as a percentage of total private line traffic. Although growth of retail private line sold to corporate customers is constrained somewhat by the popularity of virtual private network offerings, the insatiable demand for higher speed data transport by large enterprises, carrier-to-carrier sales, and carrier-to-ISP sales continues to fuel the market.
This report details revenue and circuit counts by carrier type, and looks at the split between wholesale and retail sales of T-carrier (T1, T3, etc.) and OC-N circuits (OC3, OC12, OC48, OC-192, OC-768). Insight’s annual report will provide trends in demand and deployment of T-carrier circuits, and will illustrate how carriers and their customers continue to move to higher capacity circuits in order to reap the benefits of lower cost per channel.
Private line remains a staple for large public network providers and their large corporate customers, and data continues to increase as a percentage of total private line traffic. Although growth of retail PL sold to corporate customers is constrained somewhat by the popularity of virtual private network offerings, the insatiable demand for higher speed data transport by large enterprises, carrier-to-carrier sales, and carrier-to-ISP sales continues to fuel the market. This report details revenue and circuit counts by carrier type, and looks at the split between wholesale and retail sales of T-carrier and OC-N circuits. Insight’s annual survey will provide trends in demand and deployment of T-carrier circuits, and will illustrate how carriers and their customers continue to move to higher capacity circuits in order to reap the benefits of lower cost per channel.
When the telecom industry ruptured, the recession affected the private line market-particularly the long distance private line market and the retail private line market. More generally, the telecom industry crash of 2001 and 2002 ended overly optimistic investments scenarios based on unsustainable growth objectives, impairing nearly every telecom sector. Some portions of the telecom industry, such as long distance voice (and thus the long distance private line market), went through gut-wrenching price erosion over the past half-dozen years, which reached crisis proportions as the economy turned downward. In the long distance private line market, a flood of new competitors and the introduction of wavelength division multiplexing (WDM) technology increased the numbers of players and total available network capacity in just a few short years, which set off a series of price wars that are only now settling into a stable floor price. Even the usually staid private line market has not been entirely immune to the industry's turmoil-and not surprisingly, the long distance private line market has been hardest hit. Many of the same new entrants that impacted the voice market played in the private line market and resorted to price cuts to fill excess capacity on their networks. The easiest way for these new entrants to fill their network with traffic was to sell large bandwidth private lines to others-customers most willing to sign up for these big bandwidth private lines tended to be other carriers.
A private line is a dedicated non-switched circuit or channel that is leased for a specified period. This channel provides a private and direct connection between at least two sites. Private lines can support voice, data, video, fax or multimedia communications. Private line speeds can be measured by digital signal level (e.g., DS1, DS1C, DS2, DS3), equivalent trunk level (e.g., T1, T3), or optical carrier level (e.g. OC3, OC9, OC12, OC18, OC24, OC36, OC48, OC96, OC192).
Several emerging carriers were completing their network build outs by the end of 2000 and their initial focus was wholesale private line sales; the carrier's carrier market. Consequently, wholesale long distance private line revenue was reported to have jumped from $2 billion in 1999 to $5.4 billion in 2000. This was a huge increase in one year and we suspect that some of this revenue was prepayment for capacity to be used in later years. Moreover, some companies admitted to improper accounting of transactions during this time period. The transactions in question were long term swaps of capacity between carriers, some of which recognized revenue over the entire term of the contract (ten years or more) in the year the contract was signed. These numbers represent revenue but not necessarily usage.
Insight Research has taken this situation into account and made a corresponding reduction in future revenue estimates in the wholesale segment of the private line market.
Despite the current soft economy, a reduction in the numbers of employed, and tightened IT budgets-all of which have contributed to diminished demand for telecom services-a few verities remain. End-user demand for bandwidth, competition, and changing regulations have historically been the principle drivers of growth for private lines, and over the long term,
Insight predicts that ...
Chapter I EXECUTIVE SUMMARY 1.1 Private Line Markets Today 1.2 Forecast Summary
Chapter II BACKGROUND 2.1 History & Development of Private Line Services 2.2 Evolution of Private Line Technology 2.2.1 Transition to Digital Networks 2.2.2 SONET and Optical Carrier Transmission 2.3 Types of Providers: Blurring Boundaries & Definitions 2.3.1 IXCs 2.3.2 Local Exchange Carriers 2.3.2.1 ILECs 2.3.2.2 CLECs 2.3.2.3 Other CLECs: DLECs & Gigabit Ethernet Providers 2.4 Description of Private Line Services 2.4.1 Circuit Types 2.4.1.1 56 Kbit/s Circuits 2.4.1.2 64 Kbit/s Clear-Channel Circuits (DS0) 2.4.1.3 Fractional T1 Circuits 2.4.1.4 T1 Circuits (DS1) 2.4.1.5 Fractional T3 Circuits (Fractional DS3) 2.4.1.6 T3 Circuits (DS3) 2.4.1.7 Optical Carrier Circuits (OC3, OC12, OC48, OC-192, OC-768) 2.4.1.8 Wavelength Services 2.4.1.9 IRUs and Dark Fiber 2.4.2 Circuit Ordering 2.4.3 Circuit Layout 2.4.4 Redundancy & Restoration
Chapter III TRENDS, APPLICATIONS, AND MARKETS 3.1 Overview 3.1.1 CLECs 3.1.2 IXCs 3.1.3 Cable MSOs 3.1.4 Wireless Operators 3.1.5 The FCC 3.1.6 RBOCs 3.2 Market Forces 3.2.1 Adding Voice to Data Networks 3.2.2 Managed Packet Networks 3.2.3 Encryption over VPN 3.2.4 Gigabit Ethernet Services 3.2.5 Integrated Services 3.3 Applications 3.3.1 Internet Access 3.3.2 Special Access 3.3.3 Local Private Lines 3.3.4 Interexchange Private Lines 3.3.4.1 Dedicated Private Line Networks 3.3.4.2 Emerging Carriers 3.4 Wholesale vs. Retail Markets 3.4.1 Wholesale Services 3.4.2 Retail Services 3.4.3 Facilities-Based Carriers vs. Resellers 3.4.3.1 Local Resellers 3.4.3.2 Long Distance Resellers
Chapter IV NETWORK PROVIDERS 4.1 Overview 4.2 AT&T Corporation 4.2.1 Network Architecture 4.2.2 Private Line Services Offered 4.3 BellSouth Corporation 4.3.1 Network Architecture 4.3.2 Private Line Services Offered 4.4 Broadwing, Inc. 4.4.1 Network Architecture 4.4.2 Private Line Services Offered 4.5 Level 3 Communications, Inc. 4.5.1 Network Architecture 4.5.2 Private Line Services Offered 4.6 Qwest Communications International, Inc. 4.6.1 Network Architecture 4.6.2 Private Line Services Offered 4.7 SBC Communications, Inc. 4.7.1 Network Architecture 4.7.2 Private Line Services Offered 4.8 Sprint 4.8.1 Network Architecture 4.8.2 Private Line Services Offered 4.9 Verizon Communications 4.9.1 Network Architecture 4.9.2 Private Line Services Offered 4.10 Williams Communications, Inc. 4.10.1 Network Architecture 4.10.2 Private Line Services Offered 4.11 WorldCom 4.11.1 Network Architecture 4.11.2 Private Line Services Offered
Chapter V MARKET FORECAST 5.1 Private Line Market Summary 5.1.1 Methodology 5.1.2 Definitions 5.2 Forecasts and Analyses 5.2.1 Total Market 5.2.2 Local and Long Distance 5.2.3 Wholesale and Retail 5.2.4 Carrier Types 5.2.4.1 ILECs 5.2.4.2 CLECs 5.2.4.3 IXCs 5.2.4.4 Totals by Carrier Type 5.2.5 Circuit Class 5.2.5.1 Local Circuit Count 5.2.5.2 Long Distance Circuit Count
Appendix GLOSSARY COMPANIES SITED
Table of Figures
Chapter I I-1 Typical Layout for a Full Circu I-2 Total Private Line Revenue, 2003-2008 ($Millions)
Chapter II II-1 Capacities of 64 Kbit/s, T1, and T3 Circuits II-2 Typical Layout for a Full Circuit II-3 ISDN Switched Backup II-4 SONET Rings II-5 Fiber-to-Fiber Redundancy II-6 Cable-to-Cable Physical Redundancy (Diverse Cable Redundancy)
Chapter III III-1 Common Drivers of Private Line Services III-2 Managed Packet Network--Virtual Private Line III-3 Integrated Services Architecture III-4 Internet Access Architecture III-5 Special Access Architecture III-6 Interexchange Private Line Architecture III-7 Typical Circuit Switched Voice Network III-8 Typical Packet Switched Network III-9 Typical IP Network
Chapter IV IV-1 All-Optical Switch Network IV-2 Private Line Metro Service IV-3 SONET Dedicated Ring Service IV-4 SONET Services IV-5 Circuit Emulation
Table of Tables
Chapter II II-1 Digital Services Hierarchy II-2 SONET/Optical Carrier Hierarchy II-3 Coordinated vs. Non-Coordinated Circuits
Chapter IV IV-1 Carrier Network Architecture Comparison
Chapter V V-1 Total Private Line Revenue 2000-2008 ($Millions) V-2 Private Line Revenue, Local vs. Long Distance, 2000-2008 ($Millions) V-3 Private Line Revenue by Wholesale/Retail Segments, 2000-2008 ($Millions) V-4 Revenue for Local Private Line by Wholesale/Retail Segments, 2000-2008 ($Millions) V-5 Revenue for LD Private Line by Wholesale/Retail Segments, 2000-2008 ($Millions) V-6 ILEC Private Line Revenues, Local and Long Distance, 2000-2008 ($Millions) V-7 ILEC Private Line Revenues by Wholesale/Retail Segments, 2000-2008 ($Millions) V-8 CLEC Private Line Revenues, Local and Long Distance, 2000-2008 ($Millions) V-9 CLEC Private Line Revenues by Wholesale/Retail Segments, 2000-2008 ($Millions) V-10 IXC Private Line Revenues, Local and Long Distance, 2000-2008 ($Millions) V-11 IXC Private Line Revenues by Wholesale/Retail Segments, 2000-2008 ($Millions) V-12 Private Line Revenue Totals by Carrier Type, 2000-2008 ($Millions) V-13 Wholesale Private Line Revenue Totals by Carrier Type, 2000-2008 ($Millions) V-14 Retail Private Line Revenue Totals by Carrier Type, 2000-2008 ($Millions) V-15 Local Private Line-Estimated Circuit Count by Circuit Class, 2001-2008 V-16 LD Private Line - Estimated Circuit Count by Circuit Class, 2001-2008
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