1/18/2005 -- IP and MPLS revenues declined in 2003, but 2004 was a year of resurgence. What’s more, IP and MPLS growth seems assured for the future—nearly doubling by 2007, for example.

That’s the upshot of analysis conducted by market research specialist Infonetics Research, which says that after a single-digit decline in 2003 and a return to growth in 2004, worldwide service provider router and switch revenues could reach $8.4 billion by 2007, a 43 percent increase from 2003.

According to Infonetics, increased capital expenditures along with up-spike in new projects undertaken by worldwide service providers is helping to fuel growth in the service provider router and switch market.

Key new projects include data network convergence, broadband network transformation, broadening the base of private IP/VPN offerings, and ramping up IP/MPLS build-outs, researchers said.

“The future for IP/MPLS continues to shine brightly, especially as IP traffic continues to grow strongly, with broadband and IP VPN traffic underlying that growth,” said Infonetics analyst Kevin Mitchell, in a statement. “Further penetration of broadband, increases in bandwidth, and the move beyond pure access to triple-play and multiple service offerings delivered via broadband will also drive growth over the next three to five years. There are also several waves of convergence that will bring even more traffic to IP networks, including voice, ATM, frame relay, and mobile voice and data.”

The Infonetics study, called “Service Provider Plans for IP, MPLS, and ATM 2004,” is based on interviews with 26 carriers in North America, Europe and Asia. It concludes that overall IP/MPLS growth is strong and accelerating from an average of 59 percent in 2003 to 73 percent in 2005. Not surprisingly, broadband Internet is the biggest driver for IP traffic growth, followed by IP VPNs and VoIP. What’s more, by 2005, Martini/PWE3, stacked 802.1Q VLANs, and RFC 2547 VPNs will be used by more than four-fifths of carriers by 2005 to offer private IP services. And although MPLS can truly said to have arrived—just over 81 percent of respondents indicated that they use some form of MPLS interworking now—it will reach near saturation this year, when use is expected to rise to 92 percent. Finally, respondents indicated that their average capital expenditures grew by 3 percent from 2003 to 2004, rising from $1,882 million to $1,940 million last year. -Stephen Swoyer