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Business landline broadband on the rise, says Vertical Systems
But recent growth is on the decline, pointing to tightening telecom economy

If you’re looking for a narrow snapshot of the overall health of business telecom, you might want to check out a recent research report from Vertical Systems Group. In a report entitled “U.S. Access Landlines Connect 5.3 Million Business Sites,” lead author and VSG Principal Rick Malone finds that the number of business customers with landline connections at their U.S. sites has increased by nearly 700,000 lines over the past five years to the aforementioned 5.3 links. That’s a net increase of about 7 percent over that period.

These access lines may vary from 56/64 Kbps to Gigabit speeds, but the report notes that the fastest growing line speeds are business Ethernet and business cable, with OC-3/OC-12, business DSL and fractional T1 and T3 close behind.

Significantly, the report concludes that the push to higher capacity broadband links can be seen not only in growth for fatter-pipe services but also rapidly declining demand for low-end transport at 56 or 64 kbps. Orders for T1 or fractional T1, traditionally the mainstay of business access, have trailed off in terms of growth, a development that would have been unthinkable just a few short years ago. Still, the increases in broadband access line sales have more than made up for the number of lost 56/64 kbps or (F)T1s.

It appears that businesses are migrating from their comfortable, trustworthy T1 access lines to more unpredictable Ethernet links. While carrier Ethernet has progressed greatly over the last few years, and Ethernet enjoys solid dominance in the corporate LAN, the move represents a major change in broadband access market buying behavior.

“The economic downturn will curtail total connection growth, however enterprise customer demand remains strong for lower cost, higher-speed access lines for site connectivity to business services, particularly IP/MPLS VPNs, Ethernet, and dedicated Internet access,” said Malone. “In the past five years, aggregate access bandwidth has more than tripled as a result of customer network migration to larger capacity access connections.”

As things stand, this shift towards more Ethernet-based access alternatives over traditional T1s means incumbent telcos have to share more of the business broadband access pie than they are accustomed to. Those incumbents account for about 46 percent of the U.S. Ethernet access market, a far smaller showing than it used to command when T1s were the dominant access medium. The balance is made up of rival service providers such as Time Warner Telecom and Cogent (remember when this former DLEC/CLEC used to specialize solely in DSL and T1 access?), at about 34 percent, and 20 percent sold by the hard-charging, surging cable operators who continue to raise access line rates much more quickly than corresponding rate increases for telco DSL.

However, as reported elsewhere, the trend towards growth in broadband access lines has started to reverse itself over the last four to five months. Malone has been quoted predicting a “moderate downturn,” though “not a huge disastrous” one in business broadband access.

The decline in business access lines is largely due to office/site closings, especially among financial services companies, according to Malone, who feels businesses are likely only to add access lines where deployments are already in progress or new access lines will bring near-term savings over the existing plant. Examples include legacy network (Frame Relay and ATM) convergence and migration to an IP VPN or Ethernet VPLS transport.

Article available at Telecommunications Online