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Private
Line Services Report Update
1998-2003
a market research report
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This update is based on a
report published by Insight Research in September 1996 called
Private
Line Services, 1996-2001. The report has been updated here with
information and analysis of the important events in the local and long
distance private line markets since the publication of the original
report. Updated forecasts for 1998 to 2003 are based on data
available mid-1998.
Like the original private
line report, Insight has defined private lines as DS-0, T-1, and T-3
lines leased by a customer for their full time or exclusive use.
This definition applies to both local access and long distance or
backbone networks. The report update also discusses emerging
competitors to these traditional private lines; such as Internet
protocol (IP)-based, long distance services offered by Qwest and
Williams Communications, plus alternative local access services, such as
xDSL, the generic name for digital subscriber line (DSL) systems.
New services for the residential market that use cable networks are also
included. ISDN (integrated services digital network) lines are
outside of the scope of this report, even though they often provide a
competitive alternative to private line services.
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Report Excerpt
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In this report, Insight illustrates the continued growth
expected for private line services and the challenges to
traditional carriers in these markets. Insight’s
market segmentations reflect the rapid growth of IP
technologies and new local access services, plus the
impact of competition in local telephone markets.
Interexchange carriers (IXCs) include both traditional
carriers (like AT&T, MCI, and Sprint) and emerging
IP-based long distance carriers (like Qwest and Level 3).
The competitive access providers/competitive local
exchange carriers (CAP/CLECs) include both traditional
carriers (like TCG, MCI Metro, and Frontier) and new
competitors using cable modem or xDSL technologies. The
international revenue consists only of money to US
carriers. All the forecasts in this updated report are in
actual dollars adjusted for annual inflation, thus
amounts shown are actual revenues for each year.
Revenues Lag Growth of Private Line Traffic
The private market's continual hunger for bandwidth is
sustaining the migration of end users toward higher
capacity, which leaves revenue growth lagging behind
circuit-equivalent expansion or traffic for private line
services. At the high end of the private line market, the
number of T-1 and T-3 lines in use is growing well into
the double digits across all segments. A few hundred huge
companies dominate the high end of the end-user base. A
rapidly broadening range of smaller customers are moving
into private line markets, and they have expanding data
requirements for DS-0 and other access lines.
Challenges to Circuit-Switched Services
The introduction of packet-switched services, such as ATM
and frame relay, challenges the advantages of T carrier
private line services which use traditional circuit
switching to provide customers with dedicated services.
Rather than dedicating a line or circuit to a customer
even when they are not using it, packet-switched
technologies transmit packets of digital information for
many different customers at slightly different times over
the same circuit. This arrangement allows the carrier to
use its infrastructure much more efficiently and pass the
savings on to customers. Already in 1998, long distance
carriers such as AT&T and Sprint are transmitting
increasing amounts of their traffic using these
packet-switched or cell-based technologies as it allows
lower cost use of their infrastructures.
Emerging carriers, such as Qwest and Level 3, plan to
offer competitive services at substantially lower prices
than traditional private lines. These new services, often
based on IP technologies, promise to significantly alter
the markets for private line services. Insight groups
these new long distance and local service providers with
the IXC and CLEC markets. Their impact is expected to be
significant, but since they are still offering private
line or equivalent services, they have been included with
the T-1 and T-3 forecasts.
Description of Private Line Services
High-capacity, or T services, provide for even greater
cost efficiencies than individual, analog private lines.
By multiplexing individual dedicated digital channels
into one channel of greater bandwidth, they can be
offered at a lower price than the equivalent number of
channels if purchased separately. A T-1 or DS-1 line
provides the equivalent of 24 standard private lines
multiplexed into one line at 1.544 Mbit/s (million bits
per second). T-3 in turn multiplexes 28 T-1s (or 672
DS-0s) at 44.736 Mbit/s.
T-1 initially marked the limit of what end users would
demand for voice transmission, but the data explosion has
fueled a shift to T-3. Both T-1 and T-3 are trunking
standards, usable over any transmission technology,
though they are used predominantly with optic fibers. The
North American T standard is also used by Japan, though
E-1 became the European standard and is used throughout
most of the rest of the world.
Fractional T-1 or DS-0 service was introduced at the end
of 1980s. It was largely a marketing effort by the IXCs
to migrate smaller customers from individual DS-0
channels to a T-1. Fractional T-1 is a term used to refer
to multiple DS-0s (channelized) as well as unchannelized
intermediate bit rates. It is sold as contiguous
bandwidth between the DS-0 and DS-1 level, such as 128 or
768 Kbit/s.
For some local access applications, private DS-0 lines
may compete with ISDN basic or primary rate interface
lines that are also being offered by local carriers. For
the purpose of this update, these alternative services
are not defined as private lines.
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Market Segmentation
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- Circuit Class
- Carrier Category
- IXC
- LEC
- CAP/CLEC
- International
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Table of Contents
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Chapter I
SUMMARY OF MAJOR EVENTS IN PRIVATE LINE MARKETS
1.1 Objectives and Scope of Private Line Update
1.1.1 Revenues Lag Growth of Private Line Traffic
1.2 Highlights of Recent Changes in Private Line Markets
1.2.1 New Carriers
1.2.2 New Broadband Services
1.2.3 Telecom Mergers
1.2.4 Internet Explosion
1.2.5 Private Line Technology Changes
1.2.5.1 The New SONET Hierarchy
1.2.5.2 The Shift to Digital Data
1.3 Challenges to Circuit-Switched Services
1.4 Description of Private Line Services
1.4.1 Cost Advantages of Private Lines
1.5 Private Lines Create Opportunities for Equipment
Suppliers
Chapter II
MARKET TRENDS AND DRIVERS
2.1 History of Private Line Markets
2.2 Factors Changing Private Line Markets
2.2.1 Need for New Services to Offset Declining Revenues
2.2.2 Shortage of Private Lines Leads to Price Increases
2.2.3 New Carriers Enter Market
2.2.3.1 New Carriers Offer Alternatives to Traditional
Private
Lines
2.2.4 Equipment for Maximum Use of Private Lines
2.2.4.1 Breaking the T-1 Barrier
2.2.4.2 Bandwidth Guarantees
2.2.5 Price Elasticity in Private Line Markets
2.3 Alternative Solutions to Private Lines
2.3.1 Internet Protocol and Other Virtual Data Networks
2.3.2 xDSL Technology
2.3.2.1 RBOCs’ ADSL Offerings
2.3.2.2 ISPs’ Offerings of ADSL Services
2.3.3 Low-speed ATM
2.3.3.1 Installing ATM
2.3.4 SONET Networks
2.3.5 Optical Wave Division Multiplexing
2.4 Private Line Carriers
2.4.1 Toward Managed Network Services
2.4.2 IXCs’ Private Line Markets
2.4.3 Local Access Private Line Markets
2.4.4 International Private Lines Markets
2.4.4.1 WTO Basic Telecom Agreement
2.5 Private Line Pricing
CHAPTER III
Market Forecasts
3.1 Domestic Private Line Market
3.1.1 Special Access Lines and Revenues Not Double
Counted
3.1.2 IXCs Continue to Dominate Private Line Markets
3.1.3 Corporate Customers Migrate to Higher Speed Lines
3.1.4 Growth in Private Line Circuits
3.1.5 Domestic IXC Market Shares
3.2 International Private Line Market
3.3 Local Exchange Markets
3.3.1 Local Exchange Carriers
3.3.2 CAPs & CLECs
3.4 Opportunities for Equipment Suppliers
Table of Figures
Chapter I
I-1 Private Line Revenue Growth, 1996-2002 ($Millions)
I-2 Installed T-1 and T-3 Private Line Circuits,
1998-2003
Chapter II
II-1 Carriers’ Revenue Growth from Residential and
Business
Services, 1998-2003 ($Billions)
Chapter III
III-1 Total US Private Line Services, 1998-2003
($Millions)
III-2 US Private Line Services by Carrier Category,
1998-2003 ($Millions)
III-3 Private Line Market Share by Type of Carrier, 1998
III-4 Private Line Revenue from DS-0s, 1998-2003
($Millions)
III-5 Private Line Revenue from T-1s, 1998-2003
($Millions)
III-6 Private Line Revenue from T-3s, 1998-2003
($Millions)
III-7 US Private Line Equipment Shipments: T-1 and T-3
Circuits, 1998-2003
III-8 US Private Line T-1 and T-3 Equipment Shipments,
1998 and 2003
III-9 US Interexchange Private Line Carrier Revenue
Share, 1998
III-10 International Private Line Services Market Totals,
1998-2003
($Millions)
III-11 International Private Line Services Market by
Circuit Class, 1998-2003 ($Millions)
III-12 IXC Private Line Market by Circuit Class,
1998-2003
($Millions)
III-13 LEC Private Line Services Market Totals by Circuit
Class, 1998-2003 ($Millions)
III-14 LEC Private Line Market by Circuit Class,
1998-2003 ($Millions)
III-15 CAP/CLEC Private Line Market by Circuit Class,
1998-2003 ($Millions)
III-16 CAP/CLEC Private Line Services Market Totals by
Circuit Class, 1998-2003 ($Millions)
III-17 Number of Private Line T-1 Interfaces Sold Each
Year by Carrier Type, 1998-2003 (Thousands)
III-18 Number of Private Line T-3 Interfaces Sold Each
Year by Carrier Type, 1998-2003 (Thousands)
Table of Tables
Chapter I
I-1 SONET Data Rates
I-2 Definitions of Digital Private Line Services
Chapter II
II-1 Carriers’ Revenue Growth from Residential and
Business Services, 1998-2003 ($Billions)
Chapter III
III-1 US Private Line Services by Carrier Category,
1998-2003 ($Millions)
III-2 Private Line Market Shares by Type of Carrier,
1998-2003
III-3 US Private Line Services Market by Circuit Class,
1998-2003 ($Millions)
III-4 US Private Line Equipment Shipments: T-1 and T-3
Circuits, 1998-2003
III-5 US Interexchange Private Line Carrier Revenue
Share, 1998
III-6 International Private Line Services Market Totals
by Circuit Class, 1998-2003 ($Millions)
III-7 Number of Private Lines Interfaces Sold Each Year,
1998-2003 (Thousands)
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Pricing Information
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Hard Copy Price
$ 799
Electronic Copy Price
(PDF
License Descriptions)
$ 939 Single-User Printable PDF
$ 1399 6-Seat Printable PDF
$ 2000 Unlimited Corporate-Wide Distribution
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