MARKET ANALYSIS Worldwide Service Provider Router 20112015 Forecast

David Emberley Andre Viera

IDC OPINION
2010 demonstrated continued recovery in the router infrastructure market. The edge market recovered to 2008 levels, with strong contributions from North America (NA) and Asia/Pacific (APAC) regions. The core market showed YoY improvements and continues to grow, however, has not reached prerecession (2008) levels. The EMEA and NA core router markets are still down. We should see recovery in these markets as service providers replace core routers and also introduce 100GbE connectivity. A shift in revenue opportunities for service providers led the investment in core and edge network router market. The core expanded with continued demand for backbone Internet bandwidth, modernization of router infrastructure, and growth to support new service providers. The edge was led by investment in the mobile Internet, video expansion, and business services demand for Carrier Ethernet services. IDC is forecasting growth for the worldwide service provider router market in 2011. IDC forecasts total revenue in 2011 to reach $9.6 billion, an increase of 11% over the revenue recorded in 2010. Major findings are as follows: The service provider router market will grow in 2011, with projections expecting to reach 11% increase in overall revenue by the end of 2011. The market will increase steadily in 2011, with service provider capital expenditures (capex) continuing to focus on the mobile Internet, converged packet networks, and video content services expansion. IDC believes the market will demonstrate steady improvement throughout 2011, with strength in both edge and core router segments. The core router market is expected to continue growth in 2011, with a 12.0% year-over-year increase. With two major players owning major market share, the core router market continues to demonstrate duopolistic market characteristics. Pricing pressure is limited; however, IDC expects pricing pressure at the lower end of the market from players like Huawei and Brocade. Further growth is expected in 2012 and 2013 as service providers upgrade to next-generation core routers. The edge market is expected to expand as service providers deploy connectionoriented packet business services to support private network connectivity for enterprise customers. Mobile Internet deployments are expected to drive a majority of the growth. Competition in the edge market is healthy. IDC expects pricing pressure in 2011 as vendors compete for share. Vendors with multiservice platforms should perform better than single-function products as service providers look to deploy predominantly multiservice systems.

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Filing Information: January 2011, IDC #226700, Volume: 1 Telecommunications Equipment: Market Analysis

IN THIS STUDY
This study contains IDC's worldwide service provider router forecast for 20112015. Unit shipments have not been included because this market is relatively mature and average sales values (ASVs) become meaningless when units are router blades as well as boxes. We also include a geographic split of router revenue by the following major regions: Asia/Pacific, EMEA, North America, and the rest of the world (ROW).

Methodology
The quantitative data provided in this analysis of the router marketplace stems from IDC's ongoing research focused on service provider networks and internetworking trends and technologies. This document presents revenue for 20062015. Data for 20062010 is derived from actual results; data for the period 20112015 is forecast. IDC used primary and secondary sources of information to develop the quantitative figures and analyze the major technological trends affecting the market. Primary sources of information include surveys of router vendors as well as their customers. All revenue is manufacturing revenue. For an accurate comparison of revenue where sales were made in currencies other than the U.S. dollar, quarterly revenue was calculated at the quarter's average exchange rate with the U.S. dollar, and the four quarters were summed together. Note: All numbers in this document may not be exact due to rounding.

Router Categories and Definitions

To be counted as a router in this study, a product must be capable of routing the direction of packets using a defined Layer 3 packet header. The router must be able to support the standard BGP protocols and route not only by IGP (OSPF, IS-IS) but by BGP routing. Layer 2 MPLS routers are not included unless the product can route at Layer 3 without MPLS. The definition of a core router for IDC is that it supports 2.5Gbps+ per slot and scales to at least 320Gbps full duplex routing capacity. In almost all cases, a core router is placed in the core of the network, aggregating uplinks from edge routers or large switches, and solely communicates with other core routers via BGP or MPLS protocols. The core router is also defined as a label switched router (LSR). Examples of core routers include Cisco's CRS-1, CRS-3, and 12xxx series, Juniper's T and M series, and Huawei's NE5000. Edge routers are most complex and vary in capacity requirements. Edge routers can be as small as 5Gbps and yet can also scale to 320Gbps full duplex routing capacity. Edge routers do not perform as LSRs. Edge routers typically have lower-speed interfaces but have high-speed uplinks to the core. Edge routers can perform in multiple applications: general-purpose edge routing and IP service delivery (MSE), broadband subscriber management (BRAS), and metro Ethernet packet aggregation and routing (Carrier Ethernet). To support these applications, an edge router is also defined as supporting quality of service on a granular level.

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In this forecast, router revenue includes all blades and modules bundled with routers at the time of sale or sold as add-ons to installed routers. All revenue is the manufacturer's revenue. Revenue figures refer only to the product cost; they do not include any additional cost for maintenance, installation, training, or any other services.

Market Dynamics
Over time, products that were originally sold into one router category tend to fall in price and become part of the next-lower router category. Since service provider networks vary in size and customer base, it is often the case that an edge router can serve as a core router, or that a core router is migrated to the edge to make way for an even larger core router. The lines are blurred between the install base and new shipments because routers are apt to move around in the network if demand changes. IDC will be tracking new shipments of routers by their segment category but will identify if there are known exceptions.

SITUATION OVERVIEW
Service provider spending on infrastructure routers will likely be influenced by the following trends: IDC expects the core router market to rebound in 2011, due to increasing bandwidth requirements within major tier 1 providers. Also, there is a core router replacement/upgrade cycle that should start in 2011. Edge routers will continue to be affected by price erosion, which will keep units high. Revenue should increase due to demand around service provider mobile Internet services and support for technology upgrade in networks to support faster Internet access speeds. Deployments of multiservice edge and routers with evolved packet core functionality are expected to dominate in 2011, While overall 2011 service provider capex growth ranges from flat to 2.5, investment priorities are focused on expanding customer network touch point data speeds (mobile Internet) and network convergence. This investment trend translates to a commitment to increase the portion of capex on router and switches in 2011. The BRAS market for all intents and purposes is merging into the edge router category; therefore, we have it decreasing at an increasing rate. There are very few purely BRAS-centric boxes still shipping today; most have some MSE or CE ability or are functioning with those applications. Therefore, we continue to track the edge router market as much by application as possible, and not what the product was designed for. The Carrier Ethernet market continues to be the fastest-growing market in the edge category, since these routers are used not only for edge routing but primarily for Ethernet aggregation. Because so many of the CE pure switches do not have enough Layer 3 capabilities, the Layer 2 portion of this market continues to thrive at the expense of pure Layer 2 switching.

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 The largest region for growth in the next five years will be the APAC region, followed by North America as investment continues in expanding mobile infrastructure bandwidth. IDC expects the EMEA region to recover more slowly than APAC and North America. The market leaders, Cisco (49.2%), Juniper (21.8%), Alcatel-Lucent (11.98%), Huawei (8.3%), Tellabs (4.0%), and Ericsson (1.64%), constitute 96.9% of the market. While Cisco has dominated the market, it gained share in the core market with healthy sales in APAC. Cisco's market share in the edge market increased by 1.0%. Cisco's combined market share increased by 1.8% percentage points year over year compared with 2009. Juniper's share was relatively flat at a slight 0.04 percentage point increase. Alcatel-Lucent's market share was relatively flat at a slight decrease of 0.04 percentage points. Ericsson decreased share by 2.0 percentage points. Huawei decreased market share by 0.8 percentage points, mainly driven by decreased deployments in China over 2009. As the market matures, IDC expects to see continued influence by Huawei in the service provider edge market segment, although IDC expects the influence to be focused in EMEA and ROW, and not in NA in 2011. IDC expects that vendors with solutions integrating wireless infrastructure evolution and broadband data expansion will exhibit continued growth. 2010 results suggest that vendors that have integrated their solutions to provide multiservice platforms as well as platforms that are more flexible for deployments closer to the edge repositioned to capitalize on market synergies.

FUTURE OUTLOOK
Forecast and Assumptions
Table 1 presents the top 3 assumptions for the worldwide service provider router market for 20112015.

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TABLE 1
Top 3 Assumptions for the Worldwide Service Provider Router Market, 20112015
Changes to This Assumption That Could Affect Current Forecast Reduced worldwide revenue for top service providers would have a dramatic effect on capex spending and would slow down new network deployments.

Market Force Capital spending

IDC Assumption IDC expects capex number between 12% and 15% of revenue. Service provider capital expenditures are expected to be flat YoY; however, spending will be concentrated on mobile Internet, broadband, and network convergence infrastructure.

Significance Network planning and network builds will continue, and spending has already shifted significantly from legacy equipment to converged network equipment that decreases network capex and opex costs while increasing revenue streams associated with broadband services. Lower ASVs mean lower revenue even as volume increases. Huawei is continuing to penetrate mature markets with significant pricing action, especially in the SP edge market segment. EMEA has begun to exhibit market share shifts, and we anticipate this action to continue in the service provider edge router/switch market. Equipment pricing pressure for competitive edge segments is typically 810% year over year. Core routing segments pricing remains more stable due to limited competitive forces.

Comments Under this instance, router deployments would continue; however, deployments would be spread out over longer periods of time.

Pricing

Strong competition among vendors in the edge equipment segment will impact the average sales value. In the United States, China, and Japan, service provider consolidation is forcing pricing pressure from product lines to be priced as a group, exerting significant price pressure on individual product lines. Consolidated edge routing platforms with added functionality as DPI, video caching, and service policing should manage to get a premium over dedicated platforms. The core market should see some pricing pressure; however, a dual vendor market exists, limiting pricing pressures to new contracts and router replacement. The core router market has new entries that should contribute to lower prices.

Significant pressure from low-cost vendors would have an impact in the forecast specifically focused on the edge router market.

Pricing pressure may be more significant in fast growth regions such as APAC.

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TABLE 1
Top 3 Assumptions for the Worldwide Service Provider Router Market, 20112015
Changes to This Assumption That Could Affect Current Forecast Supply shortages in the component supply chain would delay deployments of routers and systems.

Market Force Network infrastructure upgrade cycle

IDC Assumption A proportion of the technology infrastructure has reached the end of its useful life and is being slowly replaced.

Significance Replacements and upgrades will be essential for network support services opportunity.

Comments Service providers may defer network infrastructure upgrades due to supply equipment availability.

Source: IDC, 2011

Table 2 presents forecast assumptions for the worldwide service provider router market.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Macroeconomics Economy

IDC Assumption

Impact

Certainty of Assumption

IDC anticipates continued worldwide economic recovery and stabilization in 2011, with worldwide economic growth in the range of 2.53.0%. After a 2.5% increase in 2010, the global economy is expected to grow 2.5% and 3.0% in 2011 and 2012, respectively. Major economies continue to improve credit and boost worldwide demand and trade; however, IDC does expect continued weakness in parts of Europe and Latin America. Worldwide interest rates should remain low for the remainder of 2011.

Moderate. Economic growth is an enabler for increased service provider revenue. Increased demand is expected for mobile and video services from enterprise customers. Typically, service providers invest in infrastructure focused around service revenue growth. IDC expects to see higher infrastructure investment in regions that are building out mobile networks. SP investment timing may be delayed in Europe where some areas are exhibiting economic constraints. IDC anticipates that capital expenditures will increase slightly or remain flat. IDC does anticipate that capital investment will continue to shift to the mobile Internet, video distribution, datacenter connectivity, and broadband expansion. These are all areas that are connected to service provider revenue growth. China, India, and other Asia/Pacific economies are growing more moderately than in previous years; however, they should remain resilient throughout 2011.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force U.S. economy

IDC Assumption IDC expects that throughout 2011, the U.S. economy will grow moderately. The economy will continue a modest growth as long as the government creates an environment for business investment by keeping interest rates low and providing businesses with incentives for capital investment. IDC expects that policy to remain pro investment. Continued weakness in the housing sector will remain as investors cycle through excess inventory. The economy in Western Europe remains anemic, although Germany and the United Kingdom continue to exhibit strength. Economic pressure remains from high country debt ratios. Concerns remain on the eurozone countries with fiscal strains and the ability to stabilize the weaker economies. First half of 2011 should be weak, with stability in the second half.

Impact Moderate. The incentives and low borrowing costs should create an environment for investment throughout 2011. North East, West Coast, and major U.S. cities should see investment; however, weakness in state governments and economies may counter balance any economic growth.

Certainty of Assumption

Eurozone

Moderate. Selective strategic investment is anticipated in eurozone; however, economic pressure remains. Once credit and institutional support take hold, the economies will pick up toward the end of 2011.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Technology/ service developments Mobile Internet

IDC Assumption

Impact

Certainty of Assumption

The mobile Internet, defined as the technology to enable end users to connect to the Internet and global services using mobile phones tablets and smartphones, has become a focus of all service providers worldwide. The ability to provide individuals with connectivity and services, at broadband speeds, has become an enabler for new service growth opportunities in what has been a challenging revenue market. Mobile data and services are the fastest growth revenue stream for service providers, and developing the infrastructure is going to be a fundamental focus in the next two to three years.

High. Shift in capital expenditures from traditional wireline to mobile Internet continues. It should favor wireless radio, routers, fiber optics, and access aggregation technology, as well as security, network operations, and service-enabling software.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Convergence

IDC Assumption Convergence is a complex phenomenon working at many levels convergence of the telephone network and the Internet, of communications and IT technologies, of consumer and enterprise technologies, and even of storage, routing, and processing in the datacenter. Of these, perhaps the most overarching is the convergence of voice, video, and data communications. IDC assumes that this convergence is a permanent phenomenon and that it will pick up pace as the decade wears on. One measure is that IDC expects that by 2012, there will be 1.9 billion users on the Internet and 3 billion users of the phone network. The overlap will be significant. Both domestic and pure-play offshore providers are increasing their global sourcing sophistication, allowing for higher-quality levels at lower blended rates.

Impact High. Convergence will drive new competitive dynamics, offer new applications and functions to customers, and strain the legal and regulatory systems. It will also drive increased telecom spending. In addition to creating new service opportunities, IDC expects telecom network convergence to lower service provider network operation costs. Convergence is also driving service providers to change equipment that consolidates packet services. This trend is expected to increase demand for multiservice edge switching systems.

Certainty of Assumption

Global sourcing

Moderate. Though the maturation of offshore offerings will increase the overall market opportunity by allowing existing customers to expand the scope of their contracts and new customers to utilize services that were previously too expensive, the price pressures will negate much (but not all) of that effect on the overall services markets. Nevertheless, the net impact of increased market opportunity will somewhat outweigh decreased prices. High. Replacements and upgrades will be essential for network support services opportunity.

Network infrastructure upgrade cycle

A proportion of the technology infrastructure has reached the end of its useful life and is being slowly replaced.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Cloud computing

IDC Assumption Cloud computing and software as a service (SaaS) should pick up momentum in 2011. The significant driver is lowering cost of traditional IT datacenter functions by allowing enterprise and users to store, manage, and act on information in a virtual environment. Many companies in the IT and sourcing domain are building datacenter capabilities to offer cloud computing services. IDC expects to see continued growth in back office, financial, sales, and other corporate functions. IDC also anticipates that video and telepresence to increase as the technology becomes cost effective compared with travel.

Impact High. New infrastructure deployments of cloud computing datacenter should drive increase demand for router and switching infrastructure within service provider networks as their divisions begin offering cloud services. IDC also anticipates that demand for private line connectivity using VPNs will also increase demand for router and switching infrastructure.

Certainty of Assumption

Capitalization Capital spending IDC expects capex number between 12% and 15% of revenue. Service provider capital expenditures are expected to be flat YoY; however, spending will be concentrated on mobile Internet, broadband, and network convergence infrastructure. High. Network planning and network builds will continue, and spending has already shifted significantly from legacy equipment to converged network equipment that decreases network capex and opex costs while increasing revenue streams associated with broadband services.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Market characteristics Pricing

IDC Assumption

Impact

Certainty of Assumption

Strong competition among vendors in the edge equipment segment will impact the average sales value. In the United States, China, and Japan, service provider consolidation is forcing pricing pressure from product lines to be priced as a group, exerting significant price pressure on individual product lines. Consolidated edge routing platforms with added functionality as DPI, video caching, and service policing should manage to get a premium over dedicated platforms. The core market should see some pricing pressure; however, a dual vendor market exists limiting pricing pressures to new contracts and router replacement. The core router market has new entries that should contribute to lower prices. Most service providers will replace equipment at least every five years.

High. Lower ASVs mean lower revenue even as volume increases. Huawei is continuing to penetrate mature markets with significant pricing action especially in the SP edge market segment. EMEA has begun to exhibit market share shifts, and we anticipate this action to continue in the service provider edge router/switch market. Equipment pricing pressure for competitive edge segments is typically 810 % year over year. Core routing segments pricing remains more stable due to limited competitive forces.

Replacement cycle

High. Because so much networking equipment was sold in 2004 and into 2005, it is time for product replacements. Many service providers have made their choices by now and are in the beginning of this cycle.

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TABLE 2
Key Forecast Assumptions for the Worldwide Service Provider Router Market, 20112015
Accelerator/ Inhibitor/ Neutral

Market Force Business packet services

IDC Assumption The forecast for router sales assumes continued growth of business packet service offerings. Packet services driven by Carrier Ethernet will continue to replace ATM/frame relay services for enterprise private multisite inter-connect and Internet access services. Broadband deployments continue to grow worldwide as subscribers shift to even faster broadband speeds. The trend is to increase the customer touch point speeds to increase service options.

Impact High. Enterprises are migrating to packet services, which enhance bandwidth scaling and network flexibility. Growth in business packet services will drive increased sales of edge routers and switches.

Certainty of Assumption

IPTV and triple play

High. Incumbent carriers continue to roll out FTTx and cable modembased services, which ultimately drive additional router deployments. Upgrade to network touch point access data speeds is also influencing router deployment. High. Service providers continue to upgrade networks to increase mobile user broadband data speeds. This trend supports growth in the edge router segments. This enables the deployment of converged mobile devices supporting mobile applications and Internet access revenue. Moderate. Since emerging markets are volatile, there may be large growth in one country while others languish. Some significant forecast upside will remain embedded in these markets.

Wireless services

IDC expects for continued investment in upgrading broadband data speed for worldwide mobile networks. Investment continues in upgrading 2G to 3G network technologies and also with LTE upgrades ramping up in early 2011.

Emerging markets

IDC expects emerging markets to see the most growth over the next five years. China and India continue to exhibit economic growth with some risk of stabilization. India and parts of Southeast Asia should see the most growth. China will stabilize and the expectation is for less growth than in 2010.

Legend: very low, low, moderate, high, very high

Source: IDC, 2011

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Table 3 shows the worldwide service provider router revenue actual and forecast by segment (core and edge) for 20062015. Table 4 shows the worldwide service provider router revenue actual and forecast by edge subsegment (BRAS, MSE, and Carrier Ethernet) for 20072015. Table 5 shows the worldwide service provider router revenue actual and forecast by geographic region for 20072015.

TABLE 3
Worldwide Service Provider Router Revenue by Type, 20062015 ($M)
2006 Core Growth (%) Edge Growth (%) Total Growth (%) 2,113.6 16.5 3,654.9 28.8 5,768.5 24.0 2007 2,500.5 18.3 5,062.8 38.5 7,563.3 31.1 2008 2,922.7 16.9 6,177.9 22.0 9,100.6 20.3 2009 2,180.0 -25.4 5,477.0 -11.3 7,657.1 -15.9 2010 2,463.4 13.0 6,178.3 12.8 8,641.7 12.9 2011 2,759.1 12.0 6,843.7 10.8 9,602.7 11.1 2012 3,145.3 14.0 7,499.3 9.6 10,644.6 10.8 2013 3,397.0 8.0 8,129.4 8.4 11,526.4 8.3 2014 3,600.8 6.0 8,787.1 8.1 12,387.9 7.5 2015 3,780.8 5.0 9,534.7 8.5 13,315.5 7.5

Note: See Table 1 for top 3 forecast assumptions and Table 2 for key forecast assumptions.
Source: IDC, 2011

TABLE 4
Worldwide Edge Router Revenue by Application Segment, 20072015 ($M)
20102015 CAGR (%) -59.0 7.8 11.4 9.1

2007 BRAS MSE Carrier Ethernet Total 910.7 1,885.5 2,266.5 5,062.8

2008 720.7 2,308.5 3,148.7 6,177.9

2009 375.1 1,931.0 3,170.9 5,477.0

2010 300.1 2,104.8 3,773.3 6,178.3

2011 210.1 2,294.3 4,339.3 6,843.7

2012 115.5 2,523.7 4,860.1 7,499.3

2013 57.8 2,725.6 5,346.1 8,129.4

2014 17.3 2,889.1 5,880.7 8,787.1

2015 3.5 3,062.5 6,468.7 9,534.7

Note: See Table 1 for top 3 forecast assumptions and Table 2 for key forecast assumptions.
Source: IDC, 2011

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TABLE 5
Worldwide Service Provider Router Revenue by Region, 20072015 ($M)
20102015 2007 North America EMEA Asia/Pacific ROW Total 2,939.8 2,458.0 1,779.7 385.8 7,563.3 2008 3,266.4 2,909.8 2,344.0 580.4 9,100.6 2009 2,770.7 2,191.2 2,338.7 356.5 7,657.1 2010 3,373.4 2,440.5 2,396.7 431.1 8,641.7 2011 3,800.3 2,636.1 2,683.4 482.8 9,602.7 2012 4,215.9 2,864.1 3,016.9 547.7 10,644.6 2013 4,537.8 3,066.8 3,321.5 600.2 11,526.4 2014 4,868.7 3,250.6 3,616.5 652.1 12,387.9 2015 5,217.2 3,427.0 3,960.6 710.7 13,315.5 CAGR (%) 9.1 7.0 10.6 10.5 9.0

Note: See Table 1 for top 3 forecast assumptions and Table 2 for key forecast assumptions.
Source: IDC, 2011

Market Context
Table 6 and Figure 1 illustrate the changes between the April 2010 (see Worldwide Service Provider Router 20102014 Forecast, IDC #222686, April 2010) and current forecasts.

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TABLE 6
Worldwide Service Provider Router Revenue, 20062015: Comparison of April 2010 and January 2011 Forecasts ($M)
Five-Year CAGR (%) 9.0 11.0

2006 January 2011 forecast April 2010 forecast Notes: 5,768.5 5,768.5

2007 7,563.3 7,563.3

2008 9,100.6 9,100.6

2009 7,657.1 7,657.1

2010 8,641.7 8,641.7

2011 9,602.7 9,980.5

2012 10,644.6 11,073.6

2013 11,526.4 11,998.1

2014 12,387.9 12,893.4

2015 13,315.5

The CAGR for the January 2011 forecast is for 20102015; the CAGR for the April 2010 forecast is for 20092014. See Worldwide Service Provider Router 20102014 Forecast (IDC #222686, April 2010) for prior forecast. Historical market values presented here are as published in prior IDC documents based on the market taxonomies and current U.S. dollar exchange rates existing at the time the data was originally published. For more details, see the Methodology section in the Learn More section.
Source: IDC, 2011

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FIGURE 1
Worldwide Service Provider Router Revenue, 20062015: Comparison of April 2010 and January 2011 Forecasts

Source: IDC, 2011

ESSENTIAL GUIDANCE
We are seeing the service provider router market expand to meet demands for video distribution as well as growing broadband requirements as global economic conditions improve. With the need to compete and differentiate, there may be some quarters this year where providers slow their spending temporarily to best determine which path or architecture to deploy. Whichever architecture is used or wherever the Layer 2 and Layer 3 demarcation is made will be less relevant, as stability of product, scalability, and the flexibility to offer new services quickly will be the main drivers of deployment.

LEARN MORE
Related Research
Worldwide Carrier Ethernet 3Q10 Market Share Update (IDC #225796, December 2010) Worldwide Telecommunications Equipment 3Q10 Market Share Update (IDC #226249, December 2010)

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 Worldwide Service Provider Router 3Q10 Market Share Update (IDC #225793, November 2010) Worldwide Branded Tape 1Q10 Vendor Analysis (IDC #224226, July 2010) Worldwide Optical Networking 20102014 Forecast (IDC #222950, April 2010) Worldwide Service Provider Router 20102014 Forecast (IDC #222686, April 2010) Worldwide Optical Networking 4Q09 and 2009 Market Share Update (IDC #222428, March 2010) Worldwide Telecommunications Equipment 20092013 Forecast (IDC #218086, May 2009) Worldwide Ethernet Access Demarcation Devices 20092013 Forecast: Ethernet Access in the First Mile (IDC #216848, February 2009)

Methodology
Historical Market Values and Exchange Rates
Historical market values presented here are as published in prior IDC documents based on the market taxonomies and current U.S. dollar exchange rates existing at the time the data was originally published. For markets other than the United States, these as-published values are therefore based on a different exchange rate each year. Because many individual countries contribute to regional totals, it is difficult to give precise differences between current and constant currency values in this document. However, the scale of the difference can be understood from the movement of the U.S. dollar against major regional currencies. Customers should consider multiplying regional historical market values for each year by the change in value of the U.S. dollar against representative currencies in the region as shown in Table 7. This will provide a better approximation of local market growth. For example, to restate 2009 EMEA values into 2010 dollars, one would adjust the 2009 value downward by 5% (because the dollar appreciated against the euro in 2010). Please refer to IDC's regional research studies containing historical forecasts for multiple countries for more accurate regional growth in local currencies. Note that this discussion applies only to historical values prior to 2010. 2010 and all future years are forecast at a constant exchange rate.

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TABLE 7
Exchange Rates, 20032010 (%)
2003 Euro Pound Yen Canadian dollar Mexican peso Brazilian real 117 95 132 136 85 176 2004 107 84 123 126 89 166 2005 107 85 125 118 86 138 2006 106 84 132 110 86 123 2007 97 77 134 104 86 110 2008 91 84 118 103 88 104 2009 95 99 107 111 107 114 2010 100 100 100 100 100 100

Note: To restate prior-year U.S. dollars, multiply historical market values by the percentage indicated in the table.
Source: IDC, January 2011

Synopsis
This IDC study contains IDC's worldwide service provider router forecast for 2011 2015. "2010 had a 12.9% year-over-year worldwide market increase, the packet routing segment continues to be a significant portion of the telecom equipment market. As service providers continue to make investments in the mobile Internet, IDC expects service providers to continue investment in equipment required to increase network data rates for business packet and wireless services. Service providers' efforts to migrate networks to all packets services will require steady network deployments. Service provider routers and switches are the enabler for delivering packet service throughout the network and will continue to play a significant role as service providers grow mobile and video services." Andre Viera, program manager, Telecommunications Equipment at IDC

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Copyright Notice
This IDC research document was published as part of an IDC continuous intelligence service, providing written research, analyst interactions, telebriefings, and conferences. Visit www.idc.com to learn more about IDC subscription and consulting services. To view a list of IDC offices worldwide, visit www.idc.com/offices. Please contact the IDC Hotline at 800.343.4952, ext. 7988 (or +1.508.988.7988) or sales@idc.com for information on applying the price of this document toward the purchase of an IDC service or for information on additional copies or Web rights. Copyright 2011 IDC. Reproduction is forbidden unless authorized. All rights reserved.

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