IP VPN Market To Hit $34.6 Billion In U.S.: Report

Dedicated IP virtual private network (VPN) revenues will total $34.6 billion in the United States between 2004 and 2009, according to a new study from Vertical Systems Group.

According to Vertical Systems, network-based services delivered over a carrier-based Multiprotocol label switching (MPLS) or IP infrastructure will account for almost half of the revenues, totaling $17.1 billion by 2009. Nevertheless, custom Internet-borne VPN systems will account for $12.2 billion of the revenues, and site-to-site service revenues will total $5.3 billion. The firm predicts that the number of dedicated access VPN sites will total 1.7 million by 2009.

The dedicated IP VPN market is being driven largely by cost considerations, though Vertical Systems notes that both the promise of any-to-any network connectivity and voice over IP (VoIP) are significant triggers in the decision to invest in dedicated IP VPNs. The buying decision is informed by considerations of network functionality, service scope, the availability of service-level agreements, network management, VoIP integration and capital and recurring costs.

"Revenue for dedicated access VPNs is compounding at double digit rates through 2009 across all VPN segments," Vertical Systems principal Rick Malone said in a statement. "Our detailed market segmentation enables service providers and equipment vendors to quantify where they should focus their efforts in support of this burgeoning market."

According to Vertical Systems, the market is also being driven by user migration from frame relay (FR) networks. In order to minimize disruptions, these users are inclined to implement FR/IP VPN services. While digital subscriber lines (DSL) are currently the most widely used network access technology for VPN connectivity, Ethernet and OC-3+ are the fastest-growing access option