Tier 2s focus on top, bottom line growth
Recent shakeout forces carriers to look at money, not technology.
 
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U.S. and Canadian Tier 2 service provider expenditures will grow over 170%, from $2.1 billion to $5.7 billion between 2001 and 2005, according to a recent study by Infonetics Research in San Jose.
Tier 2 carriers are focused squarely now on revenue and profitability, rather than attracting and spending more capital to build out their networks, the research firm found. These service providers are now under pressure to reduce capital expenditures by using their equipment more efficiently, and by buying new products only where the operational cost savings are clear, such as with next generation voice equipment and intelligent optical hardware, the study states.
Tier 2s are taking their cue from fallen comrades: About 15 of the 90 Tier 2 carriers in the U.S. and Canada failed over the last 12 months, Infonetics found.
Of the 75 still around, Infonetics interviewed about 20 for this study. They found that many say they are interested in Multi-Protocol Label Switching (MPLS) as a traffic engineering tool and as a foundation for services like VPNs.
For quality of service and traffic engineering:
- 70% of respondents will use MPLS in 2002, up from 30% in 2001.
- 45% of respondents will use Differentiated Services in 2002, up from 25%.
- 45% of respondents will use ATM both in 2001 and 2002.
So even though spending is very tight and the focus is on the top and bottom line, advanced services should still emerge next year.
RELATED LINKS
Talking about tiers
Network World Fusion Focus on Internet Services, 01/18/99
Report: Industry downturn to extend deep into 2002
The Edge, 03/08/01
Venture funding continues its slide
Network World, 08/20/01
