Carrier Ethernet - Next Steps
Although the carrier Ethernet market is growing strongly there is still resistance to its take-up which carriers are working hard to overcome. What then are the drivers for growth?
Carrier Ethernet continues to grow strongly as a market, and also in the multiplicity of its uses. It is in service with many carriers and service providers for the pushing of IP traffic onto the global network, but it is equally handy for those looking to plug the local loop gap within regional and metro areas, getting traffic efficiently and cost-effectively to its final destination. Ethernet allows the same quality of service and the same high bandwidth levels to be assured right the way along the chain. To the initiated, it’s the obvious first choice for a range of functions.
And yet carrier Ethernet is a young market, and a standard that is still a long way from universal acceptance in the wide area. There are plenty of pockets of resistance, in fact, where Ethernet is largely shunned in favour of the familiar comfort of an older generation of technology.
One thinks of Europe and the US as being the spiritual heartland of carrier Ethernet. But even so there is work to be done by carriers serving those regions to convince a resistant element within their wholesale customer base that Ethernet is best.
Perceived safe option
“A lot of our mobile operator customers have always used SDH, and there are some that we’re currently trying to convert to the idea that Ethernet is equally safe and reliable, and that they won’t lose a whole lot of calls,” says Mattias Fridstrom, head of product portfolio at Teliasonera. “We’ve still got some way to go, as SDH really is seen as the safe option by these operators. It’s just that for the amount of traffic they are facing, measured now in Gb not Mb, it is not enough. It’s enough if you only need a few circuits, sure.”
On the evidence of Teliasonera, there are other sectors where the carrier Ethernet message has even further to go: “There’s a big problem of trust within the broadcast industry,” says Fridstrom. “They don’t want to talk about Ethernet at all, as they don’t see it as good enough for the high service quality they demand. There are plenty of major enterprises in other sectors we talk to in Sweden, and in Germany too, like banks, that also want SDH only. Their IT departments know SDH well and are less familiar with IP and Ethernet.”
The education process, he says, is an ongoing and at times it is a seemingly never-ending challenge: “We talk to everyone about how we’d like to run their traffic over Ethernet, because it’s a cost-effective option and will lead to lower prices for them,” he says. “The only way to convert the slower customers is to show the value that they’ll be getting. The problem of course is that SDH does work very well. Our SDH network is extremely reliable. We assumed three years ago that, by now, we would not have an SDH network any more. I see three, maybe more, years before the message is fully understood by all.”
The densest penetration of Ethernet in the world is probably to be found in north America: “We’re very comfortable with Ethernet, and have been offering services based on it since 2001,” says Felipe Alvarez, president at RCN Metro, a not-untypical north American Ethernet enthusiast. RCN Metro has high bandwidth, low latency metro networks in places like New York, Chicago and latterly Toronto with which it serves the needs of banks and other users of high performance networks.
“We now offer 10Gb at the edge, and there will be more Ethernet developments as the year progresses – enhancing our offer with QoS for example,” says Alvarez. “There’s a lot of other carriers looking to leverage our network as part of their solution. The challenge is where we’re looking at a location that’s off-net, where we need another service provider we can work with. The MEF 26 standard will make Ethernet interconnection easy, more like Sonet.”
Asia, by stark contrast to north America and Europe, has a very patchy record of carrier Ethernet adoption, according to Tejaswini Tilak, head of product management for Asia at Telstra International. “Asia diverges a great deal between different countries – in level of deployment of Ethernet, in the kind of services they have, and in the level of market maturity,” she says. “In Japan for example you have customers that are mature in their use of Ethernet and have specific requirements for the support of applications requiring very high bandwidth. The rest of Asia has got pockets where it’s starting to grow – in India and China for example – and other countries where it is at an early stage.”
To address this highly varied market, she says, Telstra works hard to lead wholesale customers on a fast track through the evolutionary cycle towards Ethernet, so that they are as prepared as possible ahead of demand from their own enterprise customers.
“It probably helps when we go in and talk about Ethernet running alongside something they are more familiar with, like IP VPN,” she explains. “Ethernet’s not something they usually ask for voluntarily. We’ve had some big Ethernet wins recently though – a big education institute in New Zealand and a major US operator wanting high bandwidth connections to centres in Asia.”
Japan may be comfortable with Ethernet, but Tilak says that for countries where it is less known the most effective stratagem is first to cherry-pick sectors where the technology offers the most immediate rewards – for example banking and finance.
“Anywhere that favours high bandwidth and low latency, it’s going to make sense,” she says. “I’d also identify CDN operators, and systems integrators that are, for example, looking at cloud-based services and applications. There’s quite a bit of that in Asia, in places like Hong Kong. There’s a need for secure connectivity between commercial centres.”
Growth of wholesale
So what then are the factors that are going to take carrier Ethernet from its current position to the next level? If global domination is the end game, then what’s happening over the next few years to bring that about?
Phil Tilley, VP of marketing for the Metro Ethernet Forum believes that the outlook is good: “The increasingly global adoption of Ethernet is already making it easier for everyone to talk to each other,” he says. “I believe pricing will fall for circuits, with international capacity more and more readily available, and networks that interconnect different countries.”
Tilley sees carrier Ethernet already becoming a stronger force in regions where it has not got a major history: “In the Middle East, where fibre is being developed, you’ve got operators there now asking ’How can I build my services so they look attractive to international carriers?’ They want to be able to reach out to people like BT Global Services, Orange, Verizon so they can offer their services wholesale.”
Scrutiny and interest is also flowing in the other direction, Tilley believes: “Big international carriers are looking at new regions and are asking themselves who has got the best, most Ethernet-rich network there. Their customers need the quality they are used to in their home market.”
The consequence, says Tilley, is that wholesale represents one of the fastest growing elements of the global carrier Ethernet scene, and he expects the wholesaling of Ethernet services to grow still further in the wake of the recent ratification of the MEF’s eNNI interconnect standard: “Wholesale growth is putting demands on the area of interconnects,” he says. “Phase one of eNNI has been done, defining the interface for basic communications. Later this year or early next we’ll see phase two, which we’re calling tunnel access. This is traffic with a high QoS being delivered through an access network by a service provider. We’re already seeing use of and growth in eNNI, and an implementation guide to help service providers is on the way.”
Carrier Ethernet is also enjoying a leg up as a global standard thanks to the appearance of a whole new dimension in the market – the carrier-neutral Ethernet exchange.
The value of a network, according to rough and ready anecdotal evidence, increases exponentially as more endpoints are added, and by simplifying the process of interconnecting with another Ethernet network down to one simple contract with an exchange operator, the theoretical number of endpoints that a carrier can now reach is practically unlimited.
The carrier Ethernet exchange market is dominated by two players, CENX, formed in 2009 with the express plan of establishing such a market from scratch, and data centre operator Equinix that has recently side-stepped into the sector as an adjunct to its existing IP exchange activities.
“Exchanges mean that smaller service providers can access the footprint of a major player like Verizon easily,” says Nan Chen, CEO at CENX and founder of the MEF. “In many cases there’s little chance of Verizon ever doing an individual deal with them. They don’t need to talk to 20 different people, just us. They can just continue to innovate and to develop new services without the hassle of getting those service to correspond to another network. That’s our core competency – interconnection. We normalise the process for everyone, and make it plug and play, while at the same time moving carrier Ethernet from metro to worldwide.”
Jarrett Appleby, CMO at Equinix, is excited by what he sees as an exciting couple of years ahead for carrier Ethernet. “There are all sorts of drivers for Ethernet adoption,” he says. “Just look at applications like social networking. There’s huge demand for Facebook out there. There’s gaming too, and in the business world applications like SaaS. We’re looking at the architecture implications of all these mega trends. To move away from best efforts and accommodate the quality of service, security and scalability needs of cloud and SaaS needs Ethernet.”
He believes that greater interoperability between Ethernet networks is likely to deliver a huge boost to the market: “As Ethernet gets more popular, we’re going to see a lot more collaboration between different network operators to solve the last mile issue,” he predicts. “After all, you’re never going to see AT&T laying fibre in Mumbai. No one's big enough to do it all on their own. Ethernet’s the enabler here. We’re expanding and building a lot more data centres to serve the market. We’ve been building one a year and selling it out. There’s a huge supply and demand imbalance in data centres.”
Rena Bhattacharyya, research manager for enterprise telecoms services atIDC, believes that enterprise insistence on Ethernet will become harder to ignore over the next few years, fuelling market expansion still further.
“Enterprises are a lot more dependent on applications that require a great deal of network bandwidth, applications that need them to scale up bandwidth quickly,” she says. “Just consider the transfer of video from site to site, and not just in the sense of video conferencing. Companies are using video a lot for training, it’s used in higher education too and by government organisations, for example for the transfer of court proceedings. Healthcare and telemedicine are consumers of bandwidth, for the networking of MRI and x-ray data. Ethernet’s the answer as you can buy it in increments of 10Mb or 10Gb. You’ve no longer got the fixed increments of the legacy world where you pay for something huge then maybe only use a tiny bit of it. You can upgrade to what you need for less than the cost of the equipment, and use what you’ve bought to carry a wide range of traffic types. There’s no need either to employ experts in a variety of technologies.”
“The thirst for speed is not ending any time soon,” agrees Bob Walters, executive director for product marketing at AT&T Business Solutions. “Today we’re offering services up to 10Gb, switched and dedicated, but we’re anticipating a migration to 40Gb and 100Gb. We’re working to meet customer demand for Ethernet that’s easier, and addressing issues like total cost of ownership is a part of that.
We want to meet customer expectations, improving cycle times and fine tuning, all the things that occur when dealing with an emerging technology. We need to bear in mind scalability too, and we’re putting software automation in place to streamline that.”
There are strong signs already that emerging economies are moving fast to catch up with Europe and the US on Ethernet penetration – driven by the increasingly global nature of commerce: “Lots of organisations need worldwide communications with the same SLA wherever,” says Sarita Fernandes, senior director of product management with at Reliance Globalcom. “We’ve got a lot going on in the US, but our real growth markets are India and other parts of Asia.”
Fernandes says that it is the incipient financial services markets in these emergent economies that Reliance is getting most traction out of: “Ethernet works for financial services trading applications because of its low latency, and for the last two or three years we’ve been growing in that sector,” she says. “We provide direct access into exchanges all over the world. Media companies too want to scale quickly as their needs grow, as do legal firms, a growing area for us. There’s horizontal applications too, anyone with a geographically diverse operation, and branches they need to talk to. They are getting away from ATM and Frame Relay and looking at Ethernet over MPLS. Our offer is consistent wherever you buy it.”
The next wave
The next wave of carrier Ethernet demand will be focused around multipoint traffic delivery, believes John Hoffman, head of Ethernet product management for the Global VPN Services division at Tata Communications. “It’s talked about today but not much used. Analysts are saying it will be 60% of the market in five years.”
He believes that Tata’s mature stake in Ethernet will deliver solid results in a multipoint world: “It was about five years ago when we identified Ethernet as a critical service going forward,” he says. “We now have two global networks, over Sonet and over MPLS, available point to point, point to multipoint, managed or unmanaged. We provide 10Gb Ethernet in 25 cities now. There’s demand from all varieties of customer. Financial services was an early adopter sector, and continues to be a good user, with banks moving Ethernet further and further into their networks. Media was early too, and now we’re seeing manufacturing and even education. Around 30 to 40% of our Ethernet business is wholesale, with the rest directed at enterprises, mainly in India.”
While the demands of mobile network operators are probably the most talked about driver of carrier Ethernet wholesale demand at the moment (see analysis on p15), there are also many wired market motivators too.
“Various private and public institutions use Ethernet for the cost-efficient roll-out of Layer 2 and Layer 3 VPN and VoIP services,” points out Reza Vaez-Ghaemi, technology manager for emerging markets at JDSU, which provides optical products and test and measurement solutions for telecoms. “Fibre Channel over Ethernet applications will, I predict, improve the return on investment of storage area network applications. The increasing delivery of IP video, and the rise of new data centre applications to serve bandwidth virtualisation and cloud computing needs is growing the demand for cost-effective higher speed interfaces between routers. This need is fuelling the growth in higher speed Ethernet technology, 40Gb to 100Gb.”
Any carrier Ethernet network operator currently struggling to convince customers apparently hooked on legacy standards can take heart. The list of reasons for traditional infrastructure to give way to carrier Ethernet is long, and the future march of the market nigh-on unstoppable. ¦