The Ethernet switch market reportedly declined in the mid-single digits in the fourth quarter of 2008 and now is expected to see its largest-ever drop, according to a Redwood City, California-based IT research firm.

 

Officials at Dell’ (News - Alert)Oro Group say that the market will decline more than 10 percent during the first three months of 2009, losing more than $1 billion in its quarterly run rate.

 

According to Alan Weckel, director at Dell’Oro, although it’s the most significant first quarter forecasted decline in Ethernet switch history, the first quarter typically is seasonally weak.

 

“Businesses are canceling or delaying projects and distributors are lowering inventory levels,” Weckel said. “In addition, deteriorating macroeconomic conditions have coincided with what is usually the market’s weakest quarter of the year, exacerbating the decline in the first quarter of this year.”

 

That may be – yet, as TMCnet reported, one company – Littleton, Colorado-based tw telecom inc., a managed network services provider – has bolstered its next-generation network by adding a series of Ethernet access switches from the world’s largest maker of computer networking gear.

 

Officials at tw telecom say so-called “ME 3400 Series Switches” from San Jose, California-based Cisco Systems Inc. are improving the flexibility, reliability and security of their integrated, converged services.

 

According to tw telecom’s senior vice president of strategy and business development, Michael Rouleau, the company is seeing an significant uptick in demand for SIP trunking solutions to support the Voice over IP-PBXs that enterprise customers have been deploying over the past several years.

 

“It appears that the customers’ strategy in deploying VoIP was really a two-stage approach,” Rouleau told TMCnet in an interview. “First, they made the significant investment in upgrading or changing out their digital PBXs to IP based PBX (News - Alert) systems. When they did that, the enterprise customers wanted to minimize risk and connect to the PSTN with traditional TDM interfaces like PRI circuits. Now that the VoIP PBX is widely deployed, we’re seeing enterprise customers wanting to upgrade their PSTN/network connections to something much more scalable, like SIP Trunks.”

 

Naturally, in this slower economy, service providers themselves also are budget-conscious – and this makes the ME 3400 Series a good solution.

 

The multilayer customer-located switches allow service providers to deploy Ethernet-to-the-home “triple play” and Ethernet-to-the-business VPN access services in a single solution to help reduce total ownership costs and operating expenses.

 

The formula is working. Currently, tw telecom operates in 30 states and Washington, D.C., and its national fiber footprint can reach two-thirds of U.S. businesses. According to Vertical Systems Group, tw telecom has increased its market share among businesses and ranks among the top three providers of Ethernet connections to business customers – a market that the suburban Boston research firm says is fertile, as demonstrated by this chart:

 

Tw telecom attributes much of its its own growth to an investment in a nationwide network based on a Cisco’s (News - Alert) Internet Protocol Next-Generation Network CarrierEthernet design. 

 

The design boosts converged services and operation, administration and management capabilities by evolving its access technology to the latest Cisco metro Ethernet switch.  Officials at tw telecom say that adding the Cisco ME 3400 Series to its existing Cisco 7600 Series architecture allows the company to converge packet-based services such as VoIP, high-speed Internet, disaster recovery and highly secure virtual private networks onto a single service infrastructure using cost-efficient Ethernet connections.

 

“The ability to deliver a scalable, converged network is a unique and strong value proposition for our enterprise customers,” Knuckles said.

 

As Ian Hood, a senior manager of service provider marketing for Cisco, told TMCnet during an interview, the company has seen growing interest in its converged Carrier Ethernet solution for some time as leading providers like tw telecom and others challenge their competitors.

 

“The service providers and and businesses, like Cisco, that are capable of taking advantage of economic slowdowns continue to expand their deployments of cost-saving solutions like our ‘Any-Play’ IP NGN Carrier Ethernet Design to grow their business and ‘leap-frog’ many of their smaller vertical competitors as well as their other full-service competitors,” Hood said. “Those who can take advantage of this market condition are doing so.”

 

Yet that market condition is also hurting many IT segments – and, according to Dell’Oro, Ethernet switches are among them.

 

According to the firms report, 10-gigabit Ethernet will be the only segment to show sequential port and revenue growth in 2009, as purpose-built fixed 10 GE boxes for the data center begin to contribute significantly to 10 GE growth in 2009.