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Europeans Flip for Ethernet Services: Page 3 of 4

Back on the continent, France Telecom SA (NYSE: FTE) and Deutsche Telekom AG (NYSE: DT) have been experimenting with Ethernet services for a while, but have yet to announce commercial offerings (see Atrica Plugs Into France Telecom and Deutsche Telekom Tackles Ethernet).

Market analysts confirm that the sector is hot, and that the growth in IT budgets and the growing acceptance of Ethernet as an alternative to legacy data services will only lead to greater uptake. Margaret Hopkins, an independent analyst who is currently updating a European Ethernet services report for Analysys Ltd., says Ethernet has become a much-used service in the financial sector, where companies need high-speed connections to back up large volumes of data at multiple sites on a very regular basis.

And while the finance houses have had to invest in such networks to meet regulatory and security needs, even during the downturn, "it's not just the finance sector that's spending money now. Ethernet was a bright spot for carriers even a year ago, and it's still a big growth area for European operators now. It's a decent and reliable service," says Hopkins.

That growth will result in a market worth $5 billion per year by 2008, according to forecasters at Probe Group LLC. The expansion of metro Ethernet services will lead gradually to the extension of LANs into the wide-area network, a pattern that will fuel additional demand for services and infrastructure, according to Probe VP John Marcus.

It wasn't so long ago that Europe's Ethernet services market looked decidedly shaky. LambdaNet's problems mirror those of Swedish provider Utfors AB which underwent a financial restructuring process that ended in an acquisition by Norway's Telenor ASA (Nasdaq: TELN).