Core router market seen as flat next year

The market for large service-provider core routers probably has bottomed out, but is unlikely to see any growth again until 2004, a network market researcher said Tuesday.

Worldwide sales of routers with capacities greater than 10Gbps probably have reached the end of a steep decline but won’t recover next year, as the telecommunications industry reels from bankruptcies and tight budgets, according to Tam Dell’Oro, founder of Dell’Oro Group Inc., in Redwood City, Calif.

Sales revenue from all routers will grow just one per cent in 2003, to US$6.9 billion from US$6.8 billion in 2002, according to a survey recently released by the research company, Dell’Oro said. By 2006, the market will have grown to US$8.2 billion. That market excludes DSL (digital subscriber line) routers for end customers but includes a wide range of products, from SOHO (small office-home office) routers to the big carrier core devices.

The bubble in network investment that occurred in the late 1990s, along with carriers’ tighter budgets, is likely to make product replacement cycles for service-provider routers longer in the coming years, Dell’Oro said. Rather than being replaced over a period of about four years, as was typical in the past, the routers in place in 2001 probably won’t all be replaced with new equipment until 2008. Over the next several years, many carriers will be in maintenance mode, just maintaining or incrementally improving their existing routers as needed, she said.

Cisco Systems Inc. will maintain its dominance over the industry, Dell’Oro said. It holds market share of about 80 per cent in routers of 1Gbps to 9Gbps and about 70 per cent in routers of 10Gbps and higher capacity, she said.