Shakeout Inevitable in Ethernet over Copper Market

Implications: 1.      Timing is everything. 2.      It appears that the Ethernet over copper market is finally moving beyond early adoption. 3.      Even with the most positive view of the technology potential, six or more vendors in the market probably cannot be sustained. 

Analysis:  The optimistic outlook for Ethernet over Copper (EoC) is that at the end of the day, it will kind of be a redo of the T1/HDSL business.  A decent guess of the number of links deployed in that mature market might be around 30 million.  While it is not known whether EoC will reach that number, the argument is that people do not want T1s anymore.  They only desire a slug of Ethernet bandwidth.  With all of the copper wires still out there, EoC ought to be used where fiber is too expensive, “where companies don’t want to pay for a construction build,” or they are in a hurry for the service.  There is the acknowledgement that “the only limit to doing that…is the availability of copper loops capable of supporting the higher speed Ethernet offering.”   

The pro-EoC crowd says the underlying market trends are good and that most of the business is in front of them.  They point to the success of startup, Actelis.  But it is hard to believe that the space can support all of the other vendors as well that includes Adtran, Alcatel-Lucent, Aktino, Hatteras, Zhone and others.  Consolidation and exiting from the market are inevitable.  

One compelling application of EoC for ILECs is DSLAM backhaul.  With an asymmetrical configuration on the EoC device, it could be helpful to a DSLAM supplier in getting a lot of bandwidth downstream – especially appropriate for residential broadband.   

Even Time Warner Telecom (soon to be tw telecom), which has lots of fiber assets to deliver Ethernet services, takes advantage of a small number of EoC systems.  

There is also chip development going on that could significantly lower the cost of EoC.  And there are people studying the idea of getting even greater capacity with Ethernet over copper.