Q&A: RCN Metro Optical Networks

2:45 PM -- I recently had the opportunity to discuss the Ethernet business services market with Felipe “Phil” Alvarez, President of RCN Metro Optical Networks , and Maura Mahoney, the operator’s Vice President of Sales and Marketing. Phil will be participating in a roundtable on how Carrier Ethernet services are meeting the on-demand needs of industry verticals during Ethernet Expo Americas 2009 in NYC on November 3 and 4.

A business unit of RCN Corp., RCN Metro provides high-capacity Ethernet, wavelength, and Sonet transport services to large and medium-sized businesses and other carriers. The division operates a network in the Northeast U.S., the mid-Atlantic region, and Chicago that consists of 7,600 route miles and ~313,000 fiber miles. RCN Metro offers fiber connectivity to more than 1,300 on-network locations. In 2Q 2009, RCN Metro generated about 40 percent of its revenue from financial and other enterprise customers and 60 percent of its revenue from wireline and wireless operators.

Below are highlights of the interview with Phil and Maura.

Heavy Reading: Several times over the past year, I have heard service providers comment that they think Ethernet is recession proof. Do you share that view?

RCN Metro: We have seen a tremendous amount of demand for Ethernet. Because the services we provide to our customers are integral to how they do business, it is not a discretionary expense, and therefore I believe that it is recession proof. Enterprises are almost exclusively looking to purchase Ethernet services for transport.

HR: What do you see as the top concerns of IT decision makers when buying Ethernet services?

RCN Metro: IT decision makers increasingly look at the value of a solution, and that value is being driven by the relationship of price and performance. What we are seeing now is that there are a lot more complex network designs being evaluated, especially for healthcare and financial services. Decision makers are taking the extra time to evaluate the performance and price of solutions and ensure that they align with their specific needs.

HR: Can you elaborate on the current enterprise decision-making process and what you expect going into 2010?

RCN Metro: We are spending more cycles on design in order to address a customer’s unique needs. We are also seeing quite a bit more decision making for both lower-speed and higher-speed connectivity being bumped up to senior decision makers -- CIOs, CTOs, the heads of purchasing. Sometimes we are pitted more closely against low-end price competition, but in the end the deals are still being won based on overall value.

One of the good trends that we’ve seen picking up in the second half of 2009 is there are a lot of Ethernet deals related to network grooming, network redesign, and higher-performing routes. It’s like the water level behind the dam is rising. We are noticing an awful lot of activity.

HR: Are you seeing greater Ethernet adoption in any one particular vertical industry?

RCN Metro: At least for us, the financial sector was an early adopter when we rolled out service back in 2002. They’re always pushing the envelope on performance, such as latency and packet loss. We’re keeping up with them. We just announced that we’re building an ultra-low-latency network ring with connections between collocation facilities, data centers, and financial exchanges in New York and New Jersey. Our network is going to provide the lowest latency available to a number of locations. Financial enterprises are very fanatical about testing their links, and we’ve managed to pass their tests, which positions us well to capture demand.

HR: How about other industry verticals?

RCN Metro: Healthcare also is using Ethernet. And they’re starting to develop the same level of concerns about latency and packet loss. Ethernet is being used to do remote diagnostics. You’ve got a radiologist sitting in one location and a patient somewhere else. They need latency up to spec. I think they’re going to continue to expand their use of Ethernet.

We have also seen increased demand from media and have had success there. Often, they want dark fiber. If that’s not available, they’ll look for waves or Ethernet to support their applications.

HR: What advantages does Ethernet provide enterprises when compared to other transport technologies?

RCN Metro: I think it gets to the overall value proposition -- performance, integration into their existing infrastructure, and pricing. Another driver that increases the demand for Ethernet every year is the ubiquitous availability of quality Ethernet solutions. Customers are saying, “This is a very good technology. We know how to deal with it. It’s an extension of our LAN.” Scalability is a huge advantage of Ethernet. It’s almost scalable on an on-demand basis without a hardware change.

HR: How is RCN Metro’s Ethernet offering aligned with the needs of the Ethernet market?

RCN Metro: We offer ultra-low-latency services wrapped with SLAs. We’ll share latency with customers and back it with performance guarantees. In the near future, customers will have the ability to take a look at performance statistics on a real-time basis. Also, our solution is scalable up to 10-GigE to the edge. A customer will ask for a Gig interface, start with a 100-Meg service, then scale bandwidth up without a truckroll.

HR: How about the Ethernet pricing environment? How are things holding up there?

RCN Metro: We are seeing quite a bit of price pressure in 1-Gig and 10-Gig in select areas and on select routes, but it’s not across the board. Price compression has accelerated over the last two years due to availability of options and a measure of desperation by some companies to show revenue growth. Our price reflects our value, it reflects our unique network routes, our excellent operational capabilities, and experience. It helps that our network has unique and alternate routes over utility rights of way from Maine to Virginia and in Chicago that provide route diversity and help ensure system integrity.

HR: Thanks, Phil and Maura. I look forward to seeing you in NYC.

— Stan “EtherMan” Hubbard, Senior Analyst, Heavy Reading

Interested in learning more on this topic? Then come to Ethernet Expo Americas 2009, Light Reading’s ninth conference and exposition covering the hot topic of Carrier Ethernet network technologies and services in North America. To be staged in New York, November 3 & 4, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.