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June 1, 2003

7 Min Read
Carrier Channel: Gigabit Ethernet Race Picks Up Speed

By Khali Henderson

Posted: 6/2003

Gigabit Ethernet Race Picks Up

By Khali Henderson

Ethernet is at a crossroads. At once it is finding a market among large
enterprises, but lacking in sellers. Most of the entrepreneurial champions of
high-speed Ethernet technology in the metro — the so-called EtherLECs — were
stopped in their tracks by telecom’s downturn and are now but a few. The Bells,
at long last, have picked up the baton, but their speed is slowed by the drag of
both their size, reluctance to cannibalize existing business and the lack of
competitors breathing down their necks.

While many service providers will
build out their own networks (IDC predicts metro Ethernet equipment revenue to
increase 39 percent over the next five years), others also are looking to a few
fiber-based wholesale carriers to help them bring Ethernet across the finish

Pacers in the race have long been
startups. Some of them — like Telseon and Sphera Optical Networks — were
purchased while others failed or like Yipes filed for Chapter 11 bankruptcy
protection. With the rare exception — notably MetNet Communications Inc., the
new venture from Yipes co-founder and Metro Ethernet Forum Chairman Ron Young —
new entrants to the space are unlikely to retake the lead. They can be credited
with getting the race started.

"The startups and the
initiatives over the past few years have awakened the [incumbent] carriers and
pushed them to realize that if they don’t offer a low-cost, flexible, granular
type of optical Ethernet service two things will happen: The customers will buy
it from someone else or they will do it themselves," says Nortel Networks’
Bob Mott, co-chair of the Metro Ethernet Forum’s Collateral Committee.

Mott says enterprises in the
government, higher education, medical and financial verticals are among those
that have taken matters into their own hands. Some like the City of Roanoke have
implemented optical Ethernet equipment themselves to support internal as well as
e-government applications. Others, like Blue Cross and Blue Shield of North
Carolina (BCBSNC), have turned to regional wholesalers like Progress Telecom to
link their data centers.

"There is certainly demand that
is not being addressed today," says Paul Aiello, vice president, sales and
marketing for Progress Telecom. "Depending on who your serving LEC is,
where they are in the product development, availability or product spectrum
varies dramatically."

SBC Communications Inc. is an
example of an ILEC that is moving forward. In late January SBC announced plans
for PremierSERV Ethernet Optical Network, a switched gigabit Ethernet product
that will provide businesses with flexible bandwidth options up to 1gbps for
dedicated Internet access or transparent LAN services. It will support nearly
any data transport configuration including point-to-point, point-to-multipoint
or multipoint-to-multipoint.

In another example, the wholesale
division of Verizon Communications Inc. offers carrier customers a LAN Extension
Service based on Ethernet.

"In the last year all of the
[incumbent] service providers have realized that somebody else is going to
cannibalize their T1 revenue — either the startups or the enterprises
themselves — so they’ve started to initially trial some of these
activities," says Mott.

They also joined the MEF, he says,
and notes Verizon and Korea Telecom this year joined SBC, BellSouth Corp. and
France Telecom as ILECs/PTTs among the two-year-old group’s membership.

Despite some false starts, the
end-to-end Ethernet network proposition remains on track: Since nearly all LAN
traffic starts and ends on Ethernet, it makes sense to extend it to metropolitan
area networks (MANs) and even between them in wide area networks (WANs).

"In the next 10 years, Ethernet
will inexorably take over the metro," says Michael Howard, principal
analyst and co-founder of Infonetics Research. "Of course, there will never
be a wholesale change because of the SONET/SDH installed base, but every year
Ethernet will account for a larger portion of metro capex."

This spending, he notes, is driven
by customer demand for lower prices and incremental bandwidth.

"For an end user, Ethernet is a
tremendous solution," says Boyd Chastant, senior product manager for
OnFiber Communications Inc., which sells wholesale and retail optical Ethernet
services in 12 U.S. markets. "They are familiar with it, the costs are
likely cheaper [and] they can manage it with tools they likely have in their own

"The challenge for carriers is
— especially the long-haul and established carriers — many of them have an
embedded infrastructure that they have had in place for a while. The question
is, can I deploy Ethernet for that existing infrastructure and can I do it cost
effectively or do I need to deploy a new infrastructure to support

Given today’s inhospitable economic
environment, carriers are having trouble justifying capital expenditures for new
builds, so they are trying to put Ethernet over an existing network. "The
problem there is that you don’t necessarily get the efficiency out of it,"
Chastant says.

As an alternative, he says many
carriers coming to OnFiber to "to figure out how they can incorporate our
local loops into their Ethernet offering."

Still, Chastant says it’s a small
set of providers — primarily carriers and hosting companies serving large
content providers and media companies — that are purchasing OnFiber’s Ethernet
services, which include connectivity solutions between major traffic aggregation
points — such as data centers, carrier hotels, and other service provider PoPs
— throughout each metro network as well as fiber-optic local loop connectivity.

"We are enabling an extension
of these carriers’ networks," Chastant says. "They may have a PoP
within the market where they can support IP and potentially VoIP and other
applications. We give them connectivity back to that PoP from numerous other
data centers and locations in the market. We expand the range they can sell

Ethernet at gigabit data rates has
established itself in the MAN and is beginning to extend into the WAN, notes
research firm Pioneer Consulting LLC.

Progress Telecom, which operates in
six metro markets along the eastern coast of the United States, rolled out
wholesale gigabit Ethernet transport last summer and is introducing a 100mbps
service to extend its carrier customers reach into tier 2 and 3 markets
surrounding its PoPs.

An ISP entering a new market will
not have a high enough concentration of customers to warrant a 1gbps port
"They want to be able to connect that to a 100mbps port so that they can
oversubscribe it and be selling lower capacity — 10mbps, 3mbps, whatever they
need," says Progress Telecom’s Aiello. "We allow them to aggregate 10
100mbps pipes into that GigE pipe in a way that is very cost effective," he
adds, noting that Ethernet cards are a tenth of the cost of a SONET card.

Aiello says Progress Telecom is
testing the service in the Orlando area with an ISP customer and he expects the
service to be rolled out to each of the company’s markets in the near future.

In another example, WilTel
Communications LLC announced in February the launch of its Ethernet Wide Area
Network (EWAN) transport service, a point-to-point and point-to-multipoint Layer
2 technology providing transparent Ethernet transport at speeds up to 1gbps and
bridging functionality primarily for WANs as a low-cost replacement or
alternative to Layer 1 SONET infrastructure.

EWAN leverages multiple transport
technologies to integrate with traditional services such as ATM, frame relay,
dedicated Internet access and IP VPN. EWAN on-ramps are located in the following
cities: Anaheim, Atlanta, Chicago, Dallas, Miami, New York, San Francisco, Santa
Clara, Washington D.C. and London.

Pioneer Consulting says the
evolution to 10 gigabit Ethernet, which began last year, will speed Ethernet’s
extension into the WAN.



BellSouth Corp. www.bellsouth.com
France Telecom www.francetelecom.com
IDC www.idc.com
Infonetics Research www.infonetics.com
Korea Telecom www.kt.co.kr
MetNet Communications Inc. www.metnetcom.com
Nortel Networks www.nortel.com
OnFiber Communications Inc. www.onfiber.com
Pioneer Consulting LLC www.pioneerconsulting.com
Progress Telecom www.progresstelecom.com
SBC Communications Inc. www.sbc.com
Verizon Communications Inc. www.verizon.com
WilTel Communications LLC www.wiltelcommunications.com

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