Could it possibly be true that at least one sector of the telecommunications market is experiencing strong growth amidst the current global economic crisis? Well, based on personal experience, interaction with my industry peers and the information and behavior coming from both the carrier and their target markets, the indication is that Ethernet-based services have more growth and appeal than ever.

 

 

History suggests that tougher economic conditions often force service providers and their target customers to look for greater value from their infrastructure and related solutions. The most common theme on both sides of the equation is “needing more for less.”

 

Fortunately for equipment vendors enabling highly desirable Ethernet-based services, this need does not simply translate into lower prices on all hardware and software. In contrast, technology and innovation enable the delivery of a foundation service that provides more for less to both the service provider and their customer base. This technology and innovation come in the very familiar package of Ethernet, albeit with some powerful enhancements.

 

In just about every corner of the globe, news of exciting, new residential and consumer-based services grab most of the bandwidth for headlines. However the stark economic reality is that service providers’ business, wholesale and mobile backhaul customers provide the fuel to drive their profitability engine. These target customers are urgently searching to find more economical solutions when dire economic conditions translate to a demand to enable more services for less total cost. The ‘more’ here is often related to more bandwidth than a T1/E1 or N x T1/E1 service, with layered applications (e.g., VoIP with Transparent LAN Services and Internet Access) placed over a single physical interface.

 

From the enterprise’s point of view, more challenging economic conditions lead them to search out greater sales, partnering opportunities and sales leads. This quest requires more communication and connectivity with the world. At the same time these enterprises face significant spending constraints due to the over-arching economic conditions. The combination of these two factors fuels their need for more for less. Very important to the service provider is the fact that the ‘less’ in this equation does not link directly to top-line revenue, but rather to the per-unit selling price of bandwidth compared to legacy technologies (e.g., N x T1/E1). In this case, the unit of bandwidth ties into the overall size of the connection. A few quick illustrative examples are provided in the table below:

 

 

Greater Connectivity Options Also Fuel Growth and Service Availability

Ethernet is often the obvious choice for meeting the needs of target business, governmental, and even wholesale transport (e.g., wireless backhaul) customers. Ethernet, historically, is a very low cost-per-bit solution and is much more flexible and granular when compared to legacy technologies. There are three primary media for delivery of communications services—fiber, wireless, and existing voice-grade copper. Each of these media types provides a means to deliver Ethernet-based services and each has advantages and disadvantages. Despite all of the ongoing hype on fiber deployments, fiber-based solutions are still not financially viable for the vast majority of business locations and wireless backhaul locations due to simple business-case economics.

 

 

In the early days of Ethernet service deployment, service providers wisely and opportunistically targeted fiber deployments towards the locations that had the largest bandwidth requirements and, therefore, generated the largest amount of revenue on a per customer basis (e.g., Gigabit Ethernet and Wavelength Services). This approach left the vast majority of customers under served. And this is not just an issue of time required to get fiber out to these locations. As many analysts and service providers have noted, their fastest growing target applications are from service providers for service speeds at 5 and 10Mpbs and then diminishing as you approach 100Mbps.

 

When provisioning services at these speeds with fiber deployments, it is very difficult to prove-out a realistic payback period on the construction and permitting costs, therefore, the vast majority of target customers and locations remain un-served. The ultimate solution will exploit all three types of media on an ‘as appropriate’ basis, but copper-based Ethernet access is growing rapidly due to its unique ability to cost-effectively reach all critical customers and applications with a business case that both solves the problem and provides a very attractive payback period.

 

 

Many enhancements were made to the IEEE (News - Alert) Ethernet standard throughout the past five years but few that truly expanded the harvesting potential of a service provider more than the creation and implementation of 2BASE-TL, or what is more commonly known as Ethernet over copper. In addition to improving the reliability of traditional services, this standards-based implementation enables “pay as you grow” deployment of equipment rather than major capital and construction projects. This protocol enables service providers to dramatically increase the capacity and reliability of the service interface that they traditionally utilized for delivery of T1- and E1-based services, to deliver highly desirable Ethernet-based services. And, of course, because these are Ethernet services, they can be operated and delivered seamlessly across both fiber- and copper-based infrastructures.

 

Now, service providers are able to unblock the bandwidth bottleneck in mobile wireless backhaul applications and provide seamless services for all business locations, regardless of the media that connects them to the network. The resulting lower cost/Mbps, and greater flow of information helps enterprises find value in trying economic times. More flexibility in service offerings, greater differentiation of services, and growth in top-line revenue while reducing operating expenses creates a very compelling environment for service providers.

 

Global carriers are utilizing Ethernet over copper to dramatically expand their ‘on-net’ building footprint. This is especially useful when partnering with international carriers that are trying to select a partner with the greatest overall footprint in order to maximize their potential addressable market. Ethernet and the highly desirable attributes of Ethernet over copper are providing a much-needed stimulus to both the supply and demand sides of the service equation.