WAN and Internet access trends in North America

WAN access is required for enterprises that wish to connect their headquarters, branch and remote office sites to each other. While enterprise IT managers were once chiefly concerned with technologies such as frame relay and TDM leased lines for connecting their sites, alternative WAN technologies like Ethernet have now arrived.

With the advent of DSL, cable, fixed wireless and optical access technologies, IT managers have many more connectivity solutions to choose from than they did just a few years ago. The plenitude of choices exacts a cost in the difficulty of connectivity management.

In April 2003, Infonetics Research completed "User Plans for WAN and Internet Access, North America 2003." For this study, we interviewed respondents from 240 organizations, divided equally into small (20 to 100 employees), medium (101 to 1000), and large (more than 1000). Following are some key findings from that study.

The market opportunity

Worldwide end-user WAN and Internet access service expenditures grow 24%, from $88 billion to $109 billion between 2003 and 2007, as shown in the chart below. WAN service expenditures grow steadily in North America and more robustly in ROW, where there are many more businesses just starting to connect their organizations' sites with WANs. Internet service expenditures also grow more aggressively in ROW than they do in North America through 2007; favorable regulatory environments, dense populations and newer infrastructures drive broadband and metro optical/Ethernet deployments in Europe, Asia Pacific and CALA, allowing delivery of Internet access and Internet-enabled VPN services to organizations of all sizes.

End-user trends

Frame relay and TDM leased lines remain popular for WAN connections. ATM, used to a lesser extent for enterprise access, is now mostly limited to being a core technology in carrier networks, providing QoS for data, voice and video communications. In the 1990s, ATM was tried as a LAN technology, but this was unsuccessful due to cost and interconnection issues, leaving Ethernet as the dominant choice for building enterprise LANs. Ethernet is emerging as a viable alternative to frame relay and TDM leased lines for WAN connectivity.

Where the technologies are available, IT managers may also choose broadband technologies such as DSL, cable or fixed wireless for building their WANs. These technologies are addressing key security and reliability issues and are becoming mainstream WAN and Internet access technologies at small organizations and at remote offices at large organizations.

The WAN world has changed from one dominated by frame relay and TDM leased lines to a world that uses a mix of frame relay, TDM, optical/Ethernet and broadband technologies (DSL, cable and fixed wireless). Broadband technologies leverage the Internet (in conjunction with VPNs) to build secure WANs.

Over a third of respondents purchase services in addition to WAN and Internet connectivity from their WAN or Internet service provider. Web and application hosting is the most popular additional service now, followed closely by VPNs. Web and application hosting shows no growth by February 2005, when their positions are reversed and VPNs lead. We believe that as VPNs become more popular, other services will grow apace, especially security.

Demand for WAN and Internet products and services comes from companies of all types and sizes; there are few vertical-specific differences in product or service purchase plans.

WAN and Internet drivers and problems

A general increase in WAN traffic and the addition of bandwidth-hungry applications are the two most important factors that prompt respondents to increase their WAN bandwidth. Multimedia applications and enterprise resource planning (ERP) can chew up bandwidth in a hurry, and end-users of all types are becoming increasingly dependent on basic productivity tools like e-mail, calendar and database applications.

The decreasing price of bandwidth is important to more small organizations than medium or large. Price is an issue at all levels, and all organizations look for the best pricing when buying products or services, but small organizations have spending comfort levels for their monthly access charges and will almost always upgrade once a faster service reaches that comfort level.

Respondents in our study are fairly happy with their Internet connections; security and speed top the list of problems, with just 18% considering each to be a problem. Several respondents volunteered availability as a problem: Broadband access is still difficult nationwide.

Conclusion

Service providers need to build more reliable networks for WAN and Internet access, and then provide exceptional service and support to retain customers. The main criteria users look for when choosing a service provider are:

Network reliability/availability/uptime

Service and support

Financial stability

End-users also require expertise from reputable service providers. Coverage, ability to provide universal access to broadband and bundled VPNs, and intelligent and cost effective offerings for backup connectivity will also be appreciated and help less established service providers compete against incumbents.

Neil Osipuk is Directing Analyst of Data Centers and Hosting for Infonetics Research. He can be reached at Neil@infonetics.com.