IP VPN Revenue To Skyrocket: Report

IP virtual private network (VPN) services business was a big moneymaker for service providers in 2004, and will continue to be for the next few years, according to a new report from In-Stat.

The report, "High Growth and Lots of Opportunity: The US IP VPN Services Market," indicates that IP VPN services revenues in the U.S. will continue to grow from $2.9 billion in 2004 to $8.1 billion in 2009 as service providers migrate customers from private-line services, Frame Relay and ATM networks. AT&T consolidated its leadership in the IP VPN services market, staying ahead of MCI and SAVVIS in 2004.

Because they can be operated at a much lower cost than customer premise equipment-based services, service providers have typically made IP VPN services their main offering. Moreover, despite increasing competition and price pressure in the IP VPN market, service providers have been able to maintain revenues through value-added services like network-based security.

"IP VPN services will also be a key battleground for service providers looking to capture many customers who will converge their voice, data, and video traffic onto a single service in the future," In-Stat analyst Henry Goldberg said in a statement. "They will be key sources of revenue growth for service providers as their legacy FR/ATM VPN services revenues decline over time."