Free market advocates dwell on the innate creativity and dynamism of a competitive economy – it’s the way nature works, after all. But it takes time for a healthy ecology to emerge from a tangle of weeds and, in the fast-evolving IT landscape, you sometimes get groups of competing vendors realizing that, for a more solid foundation, there’s a real need for common standards or definitions.
That’s what happened in 2001, when a group of network vendors and providers saw that, while Ethernet had risen to dominate the enterprise LAN space, it had also resulted in islands of data that could only be connected via relatively inflexible WAN protocols. A typical enterprise might have several Ethernet LANs at sites across town – so what was stopping them from linking via Ethernet itself to create one big corporate Metro Area Network?
In the late nineties, the IEEE developed 1 and 10Gbps Ethernet standards that could now physically reach across a metro area but nothing was changed to make it suitable for business or carrier-class wide area networking. It offered an attractively simple technology with ever-increasing bandwidth, but needed additional attributes if it was to compete with relatively sophisticated WAN technologies like Frame Relay and ATM.
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Carrier Ethernet as a transport service is gaining traction across businesses of all sizes due to the benefits it offers: scalability, reliability and cost efficient bandwidth. Ethernet has also emerged as an attractive service option for customers migrating from the more traditional ATM, Frame Relay, SONET and Private Line services. In fact, every conceivable vertical of customers represents a potential market opportunity.
Given the expanding market demand, service providers are rushing to expand their footprints to maximize the revenue opportunity. They are faced with two expansion options: 1) building new networks (greenfield deployments), or 2) buying from other service providers (partnerships or organic growth). Ethernet exchanges facilitate the latter option with a solution grounded on cost-efficiency and rapid implementation. As carriers interconnect their networks at these exchanges, their service footprint is automatically expanded to include the reach of the other carriers subscribing to the same exchange. Consequently, the carrier can offer Ethernet services to a more distributed range of connecting locations.
For this reason, a number of Ethernet service providers have chosen to connect to one of the exchanges that have emerged across the major metro markets in the United States. Equinix, Tinet (a Neutral Tandem company), CENX and Telx are the four exchange operators competing in this market. Ethernet exchanges were introduced to eliminate the tedious process of drawing bilateral agreements with every other carrier to which CSPs intend to connect. While the benefits of connecting to an exchange appeal greatly to service providers (thus resulting in the exchange operators signing up a long list of customers to their exchanges), 18 months since the opening of the first exchange, the actual traffic being exchanged at these exchanges is minimal.
Based on interviews with Ethernet service providers and exchange operators, Frost & Sullivan has identified one key reason for the underperformance of the exchange services: exchange operators may have over-promised and under-delivered on the services. Nonetheless, we remain convinced of the viability of the concept, and we expect that technology, services, and carrier expectations will continue to evolve.
In our 2010 insight on the Ethernet exchanges, Frost & Sullivan presented an in-depth analysis of the Ethernet exchanges definition, provider business models, key business and technical challenges that the exchanges could potentially address, and the competitive environment in the Ethernet exchanges services market.2 In this installment of our analysis on the Ethernet exchanges, Frost & Sullivan takes a close look at the following:
- Current challenges inhibiting faster adoption of exchange services
- Evolving business models of Ethernet exchanges
- Impact of Ethernet exchanges on wholesale and retail Ethernet revenues
This report is part of Frost & Sullivan's Business Communication Services Subscription, which also includes research in the following markets: Wholesale & Business/Retail Transport Services that include Private Line, SONET, Ethernet, MPLS and Wavelength Services Market, Mobile Backhaul Services, Fiber-based Video Transport Services, Dedicated Internet Access Services, Managed/Hosted Services and others. All research included in subscriptions provide detailed market opportunities (revenue, ports and pricing forecasts) and industry trends that have been evaluated following extensive interviews with market participants.
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Investment Enables New Managed Service Opportunities While Minimizing Operational Expenses
US Signal is upgrading its Internet Protocol Next-Generation Network (IP NGN) to support faster virtual Carrier Ethernet services and increase the adoption of its new Managed Data Center service, also known as Infrastructure-as-a-Service, by its enterprise customers.
Driven by increased customer demand for greater bandwidth to handle video, cloud and advanced collaboration services, the new IP NGN will enable US Signal to offer virtual Ethernet services up to 100 Gbps and grow its data center customer base. Integral to this growth will be the deployment of the Cisco® ASR 9000 Series Aggregation Services Routers for enhanced capacity, high resiliency and robust IPv6 support.
- The US Signal fiber optic network is one of the largest in the Midwest of the United States. With over 12,000 fiber route miles metro rings in 23 strategic markets, the US Signal optical backbone features advanced Cisco Dense Wavelength Division Multiplexing (DWDM) technology in a highly resilient architecture. All of US Signal's services are delivered over this protected IP NGN.
Interconnections have always been a key focus for data centers located in areas with high concentrations of network service providers. Some of these data center providers are now investing in specialized exchanges to support Carrier Ethernet services.
The Metro Ethernet Forum’s formal definition of an Ethernet Exchange, a form of an External Network-Network Interface (ENNI), is “an interconnect point among service providers where Carrier Ethernet Services are exchanged.” From an end user’s point of view, you want your service provider to supply this service so you can have a direct Ethernet connection from end-to-end.
End Users See Benefits of Ethernet
Today, most enterprises are still encapsulating their native Ethernet data into TDM/SONET/SDH then de-encapsulating it at the other end. However, more and more, end users are seeing the benefits of Ethernet Services and perhaps eventually, the entire public network may be running native Ethernet.
zColo, a Zayo Group Company and provider of carrier-neutral, interconnection focused colocation services, and CENX, Inc., operator of the world’s first and most connected Carrier Ethernet Exchanges, today announced the execution of an agreement enabling CENX to deploy its platform and offer its Carrier Ethernet Exchange services in Zayo’s data center facility located at 60 Hudson Street in New York City. The 60 Hudson Street building is among the most densely connected carrier hotels in the world. zColo is the exclusive operator of the 60 Hudson Street Meet-Me-Room. zColo also manages the riser infrastructure which enables interconnection between hundreds of domestic and international carrier and content networks throughout the building.
“Eleven Colorado business people to watch in 2011”. CENX Carrier Ethernet Exchanges offer access to more than 15 million Ethernet Service Locations (ESLs), the most of any Carrier Ethernet Exchange provider (based on published data). CENX Exchange members benefit from extended network reach, route optimization and diversification, and cost savings.