Tech winners and losers as broadband spend jumps

Companies will continue to spend more on business data services, with revenues for suppliers peaking at €28bn (£19bn) in 2008 before starting to fall because of price competition.

The market is growing because organisations are expanding their networking capabilities to deliver applications such as email, intranet access, back-office applications, VoIP and video, according to a new report from consultants Analysys.

The report's author Margaret Hopkins said in a statement: "But with strong competition and severe price cutting, this cannot last.

"Price pressure remains strong, with users expecting more for their money at every upgrade."

Ethernet spend is growing at the expense of Frame Relay, ATM and SDH leased lines.

The analyst house said broadband revenue will continue to grow at an average of six per cent per year for the next five years to reach €6.3bn (£4.2bn) by 2010. DSL technology is now widely used to connect small sites and homeworkers, providing the connectivity for secure IP-based virtual private networks (VPNs) and even Ethernet, said Hopkins.

But carrier Ethernet is the big growth story this year the report said, with a forecast increase from €1.7bn (£1.1bn) this year to €7bn (£4.7bn) in western Europe by 2010.

Hopkins added: "Point-to-point Ethernet is growing very strongly, replacing synchronous digital hierarchy leased lines and in many cases providing access to MPLS VPNs. Ethernet VPNs are starting to be adopted as replacements for FR and ATM VPNs and may displace IP VPNs in some parts of the market."