Tier 2 Carriers Eat Up Ethernet

Ethernet is becoming the weapon of choice for Tier 2 service providers, as analysts see a rush to provide intercity Ethernet services before Tier 1 carriers catch up.

The trend was signaled by two competing announcements yesterday. Broadwing Corp. (Nasdaq: BWNG) announced its Converged Services Network, an Multiprotocol Label Switching (MPLS)-based network that will begin carrying Layer 2 and Layer 3 VPNs in the second quarter of this year. And WilTel Communications Group Inc. launched the managed version of its Ethernet Wide Area Network (EWAN) service (see Broadwing Readies 'Unique' Network and WilTel Launches Managed EWAN).

Time Warner Telecom Inc. (Nasdaq: TWTC) already took this route with its multipoint Extended Native LAN, announced in June 2004 (see Time Warner Deploys VPLS With Juniper).

What's crucial to all three announcements is that the carriers are taking Ethernet beyond its point-to-point phase, using relatively new technologies such as virtual private LAN services (VPLS) to rope together customers' offices in different cities. "This is the hot market for Ethernet services: intercity private LANs," says Stan Hubbard, analyst with Heavy Reading. "They're getting maybe six months ahead of some of the larger players with these intercity offerings."

It's something the larger carriers haven't tapped into yet, and Tier 2 players believe they have a chance to grab some business by getting aggressive with Ethernet, Hubbard says.

The theory is that customers are anxious to embrace Ethernet, with all its flexibility and perceived simplicity. But many carriers, including the Tier 1 crowd, are only beginning to tap the possibilities of pure Ethernet networks; in fact, Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) are still the targets for most Ethernet services on offer today (see Sonet/SDH Dominates Ethernet Services).

Those in the Tier 2 camp "are using Ethernet WAN and other flexible Ethernet service options, like easily upgraded bandwidths, to get a competitive advantage over Tier 1 carriers" and even "over other Tier 2s and MSOs [cable Multiple System Operators]," says Michael Howard, president of research firm Infonetics Research Inc..

"We're confident this is going to help us against the big guys. Even if we pick up a few percentage points [of market share], it'll be huge," says Jamey Heinze, director of data services at Broadwing.

Broadwing in particular wanted to offer the most advanced package of Ethernet services it could. To that end, the company isn't running the Converged Services Network on its installed backbones, which use routers from Alcatel (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), and Juniper Networks Inc. (Nasdaq: JNPR). Doing so "would not allow us to offer everything as cohesively as we wanted to," Heinze says.

Rather, the company is building a new MPLS core, overlaid on its present networks and initially based on 10 nodes using Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) 8860 routers. Just about every incumbent equipment vendor has a multiservice edge router that competes with that line, but Broadwing liked Tellabs's ability to offer "hard" quality of service (QOS) as opposed to "relative prioritization," says Gina Nomellini, a senior product manager for Broadwing.

Broadwing also felt the Tellabs routers were best able to interwork between older services, such as Asynchronous Transfer Mode (ATM), and newer Ethernet services, she says (see Broadwing Picks Tellabs ).

The win is a nice boost for Tellabs, which acquired the 8800 line by purchasing Vivace Networks in 2003. Tellabs recently reported that Vivace sales fell to $3.2 million for the December quarter, down 62 percent from the previous quarter. (See Tellabs Snags Vivace for $135M, Broadwing Picks Tellabs , and Tellabs Ups Q4 Revenue.)

For further education, visit the archives of related Light Reading Webinars:

• The Challenges and Rewards of Building Profitable MPLS VPN Services
• VPLS & Pure Ethernet: A Hybrid Made in Heaven?
• VPLS: Ethernet Virtual Private Networks, Made Real
• Converged Backbones: Technology Update
• MPLS-Based Ethernet Equipment for Service Provider Networks
• MPLS: Five Key Convergence Questions
• Multiservice Edge Platforms: Empowering 21st Century Services – US Event

For more on this topic, check out:

• The Heavy Reading report:
  — Ethernet Over IP/MPLS Service Delivery Platforms: A Heavy Reading Competitive Analysis