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Metro Ethernet Stirs Debate

Light Reading
News Analysis
Light Reading
4/25/2003

There’s no question that Ethernet is the technology of choice in corporate networks. It’s cheap, easy to manage, capable of providing bandwidth from 1 Mbit/s to 10 Gbit/s, and, by now, everyone and his brother is familiar with it.

So what about Ethernet services as marketed by service providers? The big question is: How will carriers be able to make any money from these services?

Light Reading recently hosted a Webinar -- Ethernet Services: The Economics Behind the Myth -- that tried to answer this question, among others.

Three panelists were gathered on April 17th to help shed light on what it takes for service providers to make money from metro Ethernet deployments. Nav Chander, co-chairman of the Metro Ethernet Forum economics committee and director of marketing for Coriolis Networks Inc.; Tom Donahue, senior systems engineer from Cisco Systems Inc. (Nasdaq: CSCO); and Umesh Kukreja, senior product marketing manager from Atrica Inc. were on the call, along with the moderator Bob Mandeville, founder and president of Iometrix Inc. and director of Ethernet projects for Light Reading.

“Ethernet has never been bought and sold in the enterprise,” says Mandeville. “There’s never been any concept of margins or any of that before. Service providers will only deploy it if they can figure out how to make money from it.”

Based upon the input from the Ethernet experts on the Webinar, it’s clear that service providers will need to examine and calculate the costs of deploying metro Ethernet very carefully before they will be ready to jump into deployments.

According to the panelists, a major key to success in deploying metro Ethernet lies in the planning. The issues are the size of the geographic area and the number of potential customers.

“Early discussions [surrounding metro Ethernet] focused on customer equipment and the cost of the edge equipment,” said Donahue during the Webinar. “But when you scale the service, 50 percent to 80 percent of the cost is in establishing the footprint. So it’s important to design the network knowing what kind of service offering you are targeting.”

Figuring out the actual cost of a network is no easy task. Carriers must be prepared to price out the cost on an end-to-end basis. Comparing per-port and equipment costs will not provide the full picture.

Service providers also need to consider using legacy infrastructure such as Sonet and copper lines to extend the footprint to offer services to a wider range of customers.

Donahue points out that aggregation and core networks are actually where carriers would likely face the largest expenses. Most Sonet rings today in the U.S. are OC3 (155 Mbit/s) or OC12 (622 Mbit/s), said Donahue. Upgrading to OC48 (2.5 Gbit/s) to accommodate added traffic can be overwhelming.

Another big issue for carriers has to do with deploying a switched Ethernet service over a private-line Ethernet service. Switched Ethernet will eventually require a carrier to terminate traffic onto a Layer 2 or Layer 3 infrastructure. It’s the transition to this infrastructure where costs are most hidden.

“Most people don’t see it until it’s too late,” cautioned Donahue.

But Chander, of the MEF, who presented two case studies during the Webinar, points out that in a well planned network Ethernet can save carriers up to 39 percent on operational expenses over Sonet.

Want to know more? The panelists from this Webinar have agreed to answer questions about metro Ethernet services on the message board attached to this article.

— Marguerite Reardon, Senior Editor, Light Reading

This was the first in a series of three events focusing on Ethernet services. The second event, which examines what enterprise companies need to know about this technology, takes place on Thursday, May 15, at 2:00 p.m. EDT. It's titled "Ethernet Services: What's in It for the Enterprise?" Those interested may register for it here.

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mojorising
mojorising
12/5/2012 | 12:10:02 AM
re: Metro Ethernet Stirs Debate
Good question.

I have some other basic questions. When 'metro etherent' is mentioned is it inclusive of EoS? My model has been that ethernet plays a role as an access link, but is wrapped in SONET or SDH at the first aggregation point it meets, typically a MSPP. From then on it's SONET/SDH. At this point what distingusihes an ethernet service? I think some definitional and architectural discussion would be valuable in framing all the follow-on discussions. This would be of great service to the industry. Also, some sort of roadmap of transition from current technologies to future architectures would be valuable too, and the impact on both the enterprise space and the carrier space.
RemingtonEel
RemingtonEel
12/5/2012 | 12:10:02 AM
re: Metro Ethernet Stirs Debate
Could you please address the use of Ethernet-over-SONET as an enabling technolgy? Is EoS gaining traction with the carriers? When and where will large scale deployments first occur?
BobbyMax
BobbyMax
12/5/2012 | 12:09:58 AM
re: Metro Ethernet Stirs Debate
Metro Ethernet is is less expensive than the Sonet/SDH. The actual savings depend on the size of the network. The larger the size of the network, the better the savings.
burakfenerci
burakfenerci
12/5/2012 | 12:09:56 AM
re: Metro Ethernet Stirs Debate
If we claim that MetroE won't be an uprising method of networking for N.America, why all research companies are talking about quadrupling service expenditures in five years time? I believe it should be cost effective, if all of the service providers are expected to migrate to MetroE. My question is, once I deploy gigabit ethernet for example, how do I secure those ultra-fast ports? Is there a solution out there today to encrypt my data for security purposes at those speeds? As a customer, this is one of my concerns.
OkStateFan
OkStateFan
12/5/2012 | 12:09:56 AM
re: Metro Ethernet Stirs Debate
I disagree. I have launched Ethernet services in the State of Missouri and have found that vendors still want to offer the "edge" equipment at an expensive price. This keeps the ethernet service prices at or near the price of T1 pricing. The only savings is the fact that you can allow customers to burst(PIR - Peak Information Rate), and change their overall committed rate(CIR) at a moments notice. You can also gain a more faithful customer by showing the customer their overall usage and this way each customer gets an overall idea of the usage of their network acroos their EVPL(Ethernet Virtual Private LAN)
wass
wass
12/5/2012 | 12:09:55 AM
re: Metro Ethernet Stirs Debate
I personally think that some of the initial Metro Ethernet vendors did/do a disservice to their cause by claiming that the capital cost will be so reduced from a service provider perspective. This gives the expectation to the end user that the cost will be decreased by the same percentage. This makes it hard for us service providers to justify a compelling business case in the market as reality is that the physical interface cost may be reduced, but that doesn't mean the end to end service cost is reduced by the same amount.

Having said that, the real benefit of Ethernet as a service interface is that it potentially allows carriers to generate new revenue by offering a way to increase bandwidth and add new services with minimal cost in the network, e.g., without having to add physical interfaces everytime you want a change. There is an incredible amount of opportunity for this if the vendors build the "right" product. These new services could also be generated with lower operational expenses compared with the current PMO of TDM services.

There are some capital savings available - for end users CPE equipment, and possibly in the transport network if you can generate enough customers to create some form of statistical multiplexing. This latter is always tough to sell/justify, but does exist if you are smart about the equipment you choose and your network.

rmandeville
rmandeville
12/5/2012 | 12:09:37 AM
re: Metro Ethernet Stirs Debate
Your comments line up very well with the panel's views as they were expressed during the webinar. We also have to ask what the profile of enterprise demand for new Ethernet services is. This will be the subject of our May 15 webinar. Characterizing demand will help shape the supply side of the equation more accurately.

Bob Mandeville, moderator
chantheman
chantheman
12/5/2012 | 12:09:36 AM
re: Metro Ethernet Stirs Debate
In theory, Metro-Ethernet has been heralded for easy provisioning. Have there been specific examples of reduced provisioning times in existing Metro-Ethernet rollouts?
gea
gea
12/5/2012 | 12:09:36 AM
re: Metro Ethernet Stirs Debate
"In theory, Metro-Ethernet has been heralded for easy provisioning. Have there been specific examples of reduced provisioning times in existing Metro-Ethernet rollouts?"

This is one of those questions that has to be answered very carefully. First, remember we're talking about true METRO ethernet: Multiple customers are sharing the same ethernet medium.

And easy provisioning times will only be experiences in the simplest of cases, where there are no bandwidth guarantees. But now put a guaranteed bitrate as well as burstable bitrate and now we're talking about a much more complex provisioning situation. (In fact, I'd bet there have been close to ZERO of these kinds of deployments so far.)
gea
gea
12/5/2012 | 12:09:36 AM
re: Metro Ethernet Stirs Debate
"Having said that, the real benefit of Ethernet as a service interface is that it potentially allows carriers to generate new revenue by offering a way to increase bandwidth and add new services with minimal cost in the network, e.g., without having to add physical interfaces everytime you want a change"

Depending on what you mean by this, I agree. Basically, Ethernet done right will allow a fairly complete de-coupling of a customer's interface (say, 100BaseFX for now) from the services. Users should be able to be as little or as much bandwidth as they need (up to the interface), both guaranteed as well as "burstable".

This also means that service providers will be able to play some very interesting games in terms of offering ethernet services.

As for the argument that this is going to be considerably cheaper than SONET, well I think most well-informed people now know this is BS. Once you start making the Ethernet switches carrer grade, and now that SONET prices are have been hammered down, we see that the price differences are not as great as was orignally assumed.

That said, metro Ethernet has a future, but it isn't a gimmee. As 'wass' said, switch vendors will have to build the right box, and I'm not sure that's been done yet...remember that an Ethernet switch made for enterprize users is going to be very different from a switch made for service providers....totally different customer base. And of course, ironclad QoS has to be there. No way older providers such as the RBOCs are going to buy large amounts of an ethernet switch without the ability to offer service guarantees.
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