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Ethernet bandwidth costs fall to a six-year low

Ethernet bandwidth costs in data center switches fell to a six-year low in 2017. Crehan Research reported cloud provider demand for speed was behind the drop.

In 2017, Ethernet bandwidth costs in data center switches fell to a six-year low, as vendors used bargain pricing to attract speed-loving public, private and hybrid cloud providers, an analyst firm reported.

Cloud provider demand for more throughput increased last year's average bandwidth per switch port connection to almost 17 Gb from 12 Gb in 2016, according to the latest report from Crehan Research Inc., based in San Francisco.

"Public, private and hybrid cloud providers are looking to deploy much faster networks within and between data centers in order to handle the myriad of new and existing applications that their customers need," Seamus Crehan, president of Crehan Research, said in a statement. "In turn, the data center switch vendors are responding by offering significantly more bandwidth at little or no additional cost."

The net result in 2017 was impressive increases in Ethernet bandwidth, port shipments and revenue in the branded switch market, Crehan said. Revenue rose 10% -- the highest annual growth in four years.

Rising popularity of 100 GbE

The report also found a nearly $2 billion increase last year in revenue from 25 Gigabit Ethernet and 100 GbE, with the latter being the more significant contributor to the jump. The rising popularity of the two Ethernet port speeds was behind a 5% decline in 40 GbE shipments.

Also, 100 GbE became the most important single contributor to overall Ethernet bandwidth demand, surpassing the former champion, 10 GbE. From 2015 to 2017, shipments of 100 GbE ports went from an annual run rate of under 100,000 to over 4 million.

The demand for 100 GbE "bodes well for the upcoming introduction of 400 GbE data center switches, which offer the same compelling economics against the backdrop of strong cloud demand for higher network speeds," the research firm said.

The future is 400 GbE

In January, Crehan reported vendors would start shipping 400 GbE switches this year. By 2022, the high-speed networking gear would account for the majority of Ethernet bandwidth from switches.

Cloud service providers (CSPs) are behind more than rising bandwidth demands. The companies also account for a growing share of vendor revenue in the Ethernet switch market. By 2021, CSPs will spend $12 billion on Ethernet switches, which amounts to 23% of the overall market, according to IHS Markit. In 2016, CSPs accounted for 16%.

Behind the booming business of CSPs are enterprises moving application workloads to the cloud to reduce data center costs. Global spending on public cloud services and infrastructure will increase at an annual rate of almost 22% through 2021, when it will reach $277 billion, according to IDC.

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