CARRIER ETHERNET'S KILLER APPS. Check it out:
(Telephony Via Thomson Dialog NewsEdge) IN THE CONSUMER AND ENTERPRISE markets, carrier Ethernet doesn't have a single killer app, but it has several compelling ones. Enterprises, particularly large ones, increasingly see Ethernet as a way to kill several birds with one stone, including standardizing their IT and telephony infrastructure on a single technology and accommodating changing business needs.
A lot of customers are centralizing their operations and looking for disaster recovery, disk mirroring, regulatory compliance and data center backup, said Rich Klapman, product director of Ethernet access services for AT&T.
On the regulatory-compliance side, big drivers include the Health Insurance Portability and Accountability Act and the Electronic Signatures Act. Both require enterprises to store and exchange files some of them large, such as patient X-rays in real time, making fat Ethernet pipes an attractive way to link offices or to connect to business partners. Another example is Sarbanes-Oxley, which also can produce massive amounts of data, such as an oil-and-gas company uploading analyses of drilling operations in order to calculate its reserves for its quarterly financial reports.
Those regulations are driving the need for tremendous amounts of highly reliable bandwidth, said Kevin Curran, senior vice president of marketing and product management for Optimum Light-path, the business division of Cablevision Systems.
That outlook is backed by growth so far and analyst forecasts. Worldwide revenue from Ethernet services more than doubled to $5.9 billion between 2004 and 2005, according to an April 2006 report by Infonetics Research. The firm expects revenue to hit $22.5 billion by 2009. Roughly 75% of that revenue will come from retail services such as Ethernet private line and wide area network access, and transparent local area network services.
Banks are particularly interested in the high-capacity, peer-to-peer connections that Ethernet over Lambda enables. We're seeing that as both a backup-and-storage application, as well as a real-time financial services-type application, said Michael O'Malley, group manager of portfolio marketing for Tellabs.
ETHERNET HAS BEEN AROUND for about three decades. That longevity has given the technology two attributes that help from a sales standpoint, particularly in the enterprise market. First, Ethernet silicon has spent that time riding Moore's Law down the cost curve to the point that it's now highly competitive with incumbent transport technologies such as ATM and TDM.
We're seeing a lot of adoption of Ethernet because it's been around so long, and it's so cheap, Klapman said. [Some enterprises] use servers and blade servers on Ethernet even though Fibre Channel might be better for the application, but it's proprietary and expensive.
Second, over the past few years, Ethernet has entrenched itself in enterprise IT hardware. That's partly because the cost of Ethernet gear has declined and partly because the technology can eliminate the need for some hardware such as routers. There's also a general enterprise shift from private line, frame relay and virtual private network services to Layer 2 and Layer 3 IP-based services, such as Ethernet for private line replacement also known as E-Line and multipoint Layer 2 services, known as E-LAN.
We're seeing their equipment end points migrating from Layer 3 or Layer 1 to Layer 2, AT&T's Klapman said. In the data world, Layer 3 IP routers are moving toward Layer 2 Ethernet switches. We're also seeing Layer 1 circuit-switched voice boxes PBXs migrating to voice-over-Ethernet, Layer 2 packet switches.
The ability to run multiple applications over a single network technology is attractive to CIOs and IT managers because it reduces total cost of ownership. That simplicity is particularly attractive to small and medium-sized enterprises because it means that they don't have to staff a large IT department just to manage a potpourri of technologies, such as both ATM and frame relay. Those savings help make the business case for an Ethernet migration.
Ethernet adoption is driven by the fact that it's very simple, said Alla Reznik, a group manager of nationwide Ethernet services and Ethernet access for Verizon Business.
Besides the potential for lower capex and opex, enterprises also are drawn by competitive pricing. On average, we save our customers 50 percent, said Optimum Lightpath's Curran. It's very, very compelling. It's way beyond the CLECs that used to say 15 percent.
Although Ethernet has been around for decades, it's still a relatively new technology in carrier networks. As a result, vendors, service providers and industry groups such as the Metro Ethernet Forum are still developing tools and techniques to deliver the quality of service (QOS) that enterprises require.
Some of the operations, management and troubleshooting tools are less well-defined in Ethernet than they are in, say, Sonet or ATM, said Lindsay Newell, vice president of product marketing for IP at Alcatel. Service providers have been asking vendors like us to do more instrumentation and more service awareness in the network platforms. So when they deploy Ethernet infrastructure or [offer it] as an enterprise service, they have much more capability to do provisioning, troubleshooting and monitoring of individual subscribers or services, instead of just being able to tell whether a particular switch or router is up.
The ability to ensure QOS is key for displacing incumbent technologies such as ATM, particularly among enterprises that look for reliability and service-level agreements (SLAs) rather than just the low-cost option.
There's a difference between redundancy and a carrier-class service, said Tellabs' O'Malley. There's also a difference between class of service and guaranteed QOS. You can take an Ethernet switch, put it on steroids, give it a redundant switch fabric and a redundant power supply, but that doesn't make it a carrier-class device.
As more service providers offer Ethernet, QOS could emerge as a market differentiator and as a way to justify a price premium. For example, a service provider could use guaranteed, per-flow QOS to stand out from the pack of Ethernet services using non-guaranteed, class of service routing.
ETHERNET CAN BE RUN over copper or fiber. That flexibility is key because by some estimates, only 20% of U.S. enterprises are connected by fiber. Some service providers use MPLS to accommodate copper-connected enterprises, while others focus only on companies with facilities already lit with fiber. Still others eat the cost of running a fiber lateral by building that expense into their business model and pricing. The ability to do that is partly a byproduct of the same reason why Ethernet is attractive to enterprises: cheap gear.
The cost of Ethernet equipment is less expensive, so we've been able to bring down our build costs, said Curran, whose company claims that its fiber passes within 2500 feet of more than 70% of the businesses in its footprint. All they need to spend with us is $2500 a month, and we'll pay the whole cost to bring the fiber to their building.
Selling carrier Ethernet into large enterprises means acknowledging that not all of a company's offices need ultra-fat pipes. For branch offices that don't, we'll use our hybrid fiber coax plant to terminate that traffic, Curran said.
In some cases, bringing Ethernet services to a large enterprise means using another carrier's fiber to reach some of its offices. We have no problem using someone else's fiber to reach that customer, said Verizon's Reznik.
Service providers credit the MEF with creating benchmarks that help them ensure QOS when using other carriers' networks to reach customers. The MEF's product certification was very helpful for giving the customer an end-to-end SLA, Curran said.
Some enterprises require access diversity, ranging from a backup fiber line owned by another service provider to leaving copper in place even after the fiber transition is complete. You could provide diversity by leaving a T-1 intact and then have Ethernet as the primary link, said Bob Walters, executive director of metro data services for AT&T. We've seen some customers do that.
CARRIER ETHERNET'S FAT PIPES are a good fit for bandwidth-intensive residential services such as IPTV and triple plays. IPTV is bandwidth-hungry, said Tellabs' O'Malley. It's being looked at as MPEG-2 or MPEG-4 over Ethernet. Based on that, service providers are looking for a high-capacity infrastructure that can handle multiple Ethernet-based flows, stack them up across the network and then switch them wherever they need to go. From an IPTV standpoint, there's a lot of momentum in North America.
One reason why carrier Ethernet has found a market among enterprises is that it's generally cheaper than incumbent technologies. That's increasingly the case on the consumer side, too. In the access network, on the DSLAM and PON side, the pricing on a per-port basis generally is 20 to 30 percent less, said Jeff Heynen, directing analyst for broadband and IPTV at Infonetics Research.
Those savings make it easier for Ethernet-based operators to price services such as IPTV and broadband competitively yet profitably. We've got 8 million customers out there that would demonstrate that price probably is a bigger factor than speed, said Ernie Carey, vice president of network for AT&T. I still scratch my head wondering why anybody in their right mind would be on dial-up when they could have DSL at $12.99.
Another parallel between the enterprise and consumer markets is simplicity. CIOs and IT managers are drawn to carrier Ethernet because it lets them consolidate multiple services on a single technology. For some consumers, carrier Ethernet enables a bundle of services with simplified pricing from a single operator. We've got years of experience demonstrating that customers love bundles, Carey said.
Carrier Ethernet for the residential market should benefit from its growing adoption both by enterprises and in countries abroad. Those equipment volumes give Ethernet a global cost structure and help drive down the cost of gear to the point that service providers can make a business case for using the technology in more consumer and enterprise applications.
Said O'Malley: We're seeing carrier Ethernet as a global activity.
ONLINE
Read BellSouth announces virtual Metro Ethernet on our Web site. www.telephonyonline.com/ethernet
Copyright 2006 by Prism Business Information. All rights reserved.www.prismb2b.com
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