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InfoTech Study: Contrary to All the Negative Trends in the Telecom Market, Our Study Identifies a Major Growth Opportunity for IP Virtual Private Networks.

Business Editors

PARSIPPANY, NJ--(BUSINESS WIRE)--July 10, 2001

Telecom growth markets exist and despite all the negative reports Infotech's IP VPN study uncovers an $11 billion growth opportunity.

Enterprises that currently manage their own data networks, consisting of private lines and frame relay virtual circuits, are entering the initial stage of a major transformation to IP VPNs (Virtual Private Networks) managed by service providers. In the U.S., the market for Managed IP VPNs is projected to grow from $1.5 billion in 2001 to over $11 billion by 2005. The IP VPN market itself is also undergoing a huge transformation, from networks targeted at corporate data applications, to converged networks capable of supporting voice and video in addition to data. Currently these Convergence VPNs represent less that 5% of the Managed IP VPN market, but by 2005, they will mushroom to 75%.

These market projections are part of an extensive primary research study conducted by InfoTech, entitled Managed IP VPNs: Solutions for Converged Services and Applications. "Enterprises no longer want to incur the expense of supporting private data networks at their small remote sites and branch offices," said Terry White, Senior Director and IP Studies Project Manager. "With Managed IP VPNs the Service Provider assumes the responsibility for providing service and support to these remote locations."

Many of the major network service providers are offering Managed IP VPNs focused on data applications, and most of these carriers have plans to incorporate the technology needed to support voice and video traffic over the same network. This is setting the stage for a major confrontation as Integrated Communications Service Providers, such as Broadwing (NYSE: BRW) and Genuity (Nasdaq: GENU) take on the established carriers like AT&T (NYSE: T) and WorldCom (Nasdaq: WCOM). "The ICSPs want to displace the existing private networks, so they will offer aggressive pricing," according to White. "But the established carriers want to preserve their revenue base, which means they will emphasize enhanced support and quality of service, while offering modest network cost savings."

The new study, which surveyed 380 U.S. enterprises and small/mid-sized businesses, shows an upward shift from InfoTech's findings of just a year ago. A study conducted in the Spring of 2000 indicated that 19% of all enterprise locations were "very likely" to implement a Managed IP VPN with Convergence. In this year's study the demand has increased to 35%. "This is good news not only to the service providers, but also to their beleaguered equipment suppliers, such as Lucent (NYSE: LU), Nortel (NYSE: NT), Cisco (Nasdaq: CSCO) and 3Com (Nasdaq: COMS)," commented White.

InfoTech found that enterprises that are very likely to implement Managed IP VPNs for Convergence are also willing to pay a premium for differentiated Service Level Agreements. This will open the door for enterprises to subscribe to network hosted applications, such as unified messaging and remote access for telecommuting. "We see a substantial market opportunity for Service Providers to deliver high value, high margin solutions by hosting selected multimedia communications applications in conjunction with their Managed IP VPNs for Convergence," noted White.

To purchase or learn more about this or other InfoTech studies, please contact Barry Hanulak at 973-602-0137 (bhanulak@pbimedia.com).

InfoTech is a subsidiary of PBI Media, LLC, specializing in global information and professional services for the telecommunications and data networking industries. InfoTech offers a comprehensive scope of information and professional services, including custom project consulting, market and competitive intelligence programs, tactical sales support tools, primary research studies, industry conferences and custom marketing programs. Further information about InfoTech can be obtained at the company's web site at www.phillips-infotech.com.
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Publication:Business Wire
Date:Jul 10, 2001
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