The fixed line data services market is set to grow in double digits, spurred on by business migration to MPLS.
Fezekile Mashinini, telecoms analyst at BMI-T and co-author of the SA Data Services Market Forecast and Analysis report, say revenues are forecast to grow at a compound annual growth rate of 13% from R9,6-billion recorded in 2007, to R17,7-billion by 2012.
Managed data network services (MDNS), private leased circuits, and Internet services will be the main drivers of the growth.
The MDNS market, which is the primary focus of the report, will be spurred on by growth in MPLS VPN services due to their increasing popularity in the market when compared to legacy services such as Frame Relay, and X.25.
"Although there are still businesses that use legacy services like X.25 and Frame, there has been a marked migration to IP-based connections such as MPLS due to its advantages such as the ability to carry a mixed voice, data and video traffic, as well as the cost benefits of running IP.
"Growth potential exists in all the different segments of the market, such as MPLS penetration is not that prevalent which points to more opportunities for both established and emerging service providers. Correspondingly 'do-it-yourself' or self-managed IP VPN's are also on the rise in the SME market."
In terms of access technology, Metro ethernet has emerged as an alternative to the traditional connectivity methods, and rapid growth in this area is projected in the short to medium term.
Competition in the service provision space is heating up fuelled by the slow but steady pace of regulatory change in the market. Already there have been some reductions on international IPLC prices, and direct access to SAT-3 has been granted to Neotel, a move that will further heighten competition in the market.