Analysts have a hunch about IP backbones

IP backbone providers are set to coin it in, even though many technology companies are currently struggling to keep their heads above water in the internet economy.

According to telecoms research house Analysys, revenues from carrying IP traffic over the global backbone network will increase 20-fold by 2006, reaching $225bn. The report foresees steady growth in the value of the market until 2002, followed by rapid growth until 2006. Exponential growth in traffic volumes will fuel market growth, even if the actual price of bandwidth is falling - as much as 70 per cent on some routes during 2000. Global IP backbone traffic is expected to exceed 350 terabits per second by 2006 - the equivalent of all the data contained within every book in the British Library being carried 20 times per second. Tamsin Pert, analyst at Analysys and co-author of the report, said: "There's been a drop in confidence. Saying that you are rolling out a pure IP network now is not enough to attract funding. "Until 2002, there will be a consolidation in the industry, but that will help to avert a price war." This will help to keep bandwidth prices from falling too far and eroding margins, said Pert, but value-added services, which will be an important part of most company's business models, will also depend on value-added services. Analysys expects the hosting and managed networks sector, which includes value-added corporate services such as Virtual Private Networks, to expand in importance - rising from 20 to 34 per cent of revenue for the global IP backbone industry.