Prices for private line services are expected to firm up in 2006, marking the beginning of a recovery in this contracting market, according to Insight Research. 

Price compression and competition precipitated private line revenue losses beginning in 2003, according to Insight. Recent events, however, such as industry consolidations and loosened regulations are reshaping the private line business and driving a recovery, the firm asserts. 

In the U.S., the combined service revenue of frame relay and ATM will grow from $12.8 billion in 2005 to $13.5 billion in 2008, according to TIA, a compound annual growth rate of just under 2%. U.S. revenue from IP VPN services, meanwhile, will rise from $2.9 billion in 2004 to $8.1 billion in 2009, a compound annual growth rate of about 23%, according to In-Stat.

Revenue from Metro Ethernet services in the U.S. is expected to reach $2.6 billion in 2008 from $850 million in 2005, a compound annual growth rate of 45%, according to TIA.

So even though Insight expects private lines to eventually be cannibalized by IP VPNs and Gigabit Ethernet services, it continues to be a huge profit center for carriers. How quickly the market morphs will be dependant in large part on how quickly carriers reinvest private line profit into other technologies, the firm concludes.