The slowing market will put pressure on service providers, forcing them to either innovate or consolidate to stay in business, said Analysys.
Customers may also be in good position to negotiate better deals as a result.
"Competitive pressures on suppliers and the emergence of Ethernet as an access technology for metropolitan area networks (Man) and wireless area networks (Wan) means that companies continue to get more bandwidth for the same money at every upgrade," says Margaret Hopkins of Analysys.
"Service providers have to find new ways to generate revenue or else they must consolidate to survive," she said.
An Analysys report on the market said companies are "bewildered" by the maze of data service offerings for Man and Wan, and are turning to systems integrators for impartial advice. This is leading to a loss of managed services business for telecoms service providers.
In addition, data customers need reassurance about the move to next-generation networks. Users are not yet convinced that next-generation networks will offer the security and reliability that they have long been able to expect from their legacy data networks, according to the report.