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40 Gigabit Ethernet market maturing fast, with prices set to fall

Driven by video-hungry consumers and telecoms looking to shave costs, the 40 Gigabit Ethernet (GbE) cost-per-bit is likely to drop below the 10 GbE cost, giving the technology a quick boost toward going mainstream.

40 Gigabit Ethernet (GbE) connections are fast maturing, with prices likely to drop soon, driven largely by carriers looking for a way to support booming video traffic.

"One of the things we learned in our research was that the break-even point between 10G and 40G, where the latter becomes more economical, is coming sooner than expected -- next year," said Ron Kline, an Ovum analyst.

That's faster than Ovum had originally anticipated, but carriers like AT&T and Comcast have been paying a premium for 40 GbE connections in order to spur vendors to start producing them in greater quantities -- and at lower prices. The 40 GbE line card market had already reached $178 million in 2007, according to new research from Ovum. The firm singled out Nortel as particularly aggressive in this area, winning 30 customers with its DP QPSK since the device was launched in April.

Helen Xenos, product marketing managerfor Nortel, said there are a wide range of customers interested in the product, including telecoms and cable operators in North America, India, and Asia.

"When the 40 gig market started, it was primarily for connecting data centers together and for router links, connecting cities together," she said. "Now we're getting a lot of traction not only for 40 gig but also for muxing together four 10 gig connections"

This latter use, she said, could help drastically cut costs and make more efficient use of available spectrum.

"Once you get that momentum, it certainly has a positive effect on the marketplace," Kline said. And Ovum believes the momentum is there: The report predicted 48% growth annually through 2013.

To date, Kline said, many of the major sales of 40 GbE equipment have been to educational institutions and military customers, the latter generally keeping quiet about even the largest of deployments. Carriers are beginning to deploy 40 GbE more widely, however, both as a router-to-router interconnect option and, slowly, closer to the edge of the network.

At this point, even the recession is unlikely to delay many 40 GbE deployments, Kline said, because they are becoming a relatively simple way to cut costs as providers replace 10 GbE connections.

"There's a chance it could [be slowed by the economy]," he said. "But I think that people will spend their money here because they get their bang for the buck."

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