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Private-line decline could mean more T1 deals

In-Stat/MDR says that the market for T1 and other private line network services will soon decline at the hands of business-class DSL services and IP-based offerings, but prices are likely to drop as well.

According to new research, the market for traditional T1 and other private line network services will soon decline -- but that is likely to mean lower prices for enterprises that prefer those services to newer IP-based offerings.

A new report from Scottsdale, Ariz.-based In-Stat/MDR states that, even though U.S. businesses increased their spending by 4% last year on private line services (such as integrated and fractional T1 leased voice and data lines), spending during the next four years will decline by 22% from its $23 billion level last year.

As a result, prices for those services will likely decline over time, especially as more enterprises move to IP-based services, said Kneko Burney, chief market strategist for In-Stat/MDR.

"We're already seeing downward pricing pressure, particularly in markets where SDSL and HDSL are available. Even the cable operators are offering high-value services to enterprise customers on their metro loops," Burney said.

Burney said that, as business-class DSL capabilities broaden, companies will gradually migrate to that technology. But the transition may be long and arduous, as service providers struggle to keep customers, either though pricing discounts or by moving them to other types of services.

A decade from now, Burney said, the market could be half the size it is today.

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However, since business-bandwidth demands are only increasing, Burney said, vendors may be able to successfully compensate for lost private line services revenue through DSL and other means.

"I think the biggest issue is service levels, and alternatives like DSL don't have consistent service-level agreements. So I think that's part of the challenge," Burney said.

In-Stat/MDR also found that small businesses are already spending less on private line services, often choosing DSL or cable alternatives, though the enterprise market comprises more than 77% of all expenditures on private line services.

The report, "The Future of Private Line Services in U.S. Businesses," is available from In-Stat/MDR for $3,495.

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