Metro Ethernet Stirs Debate
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.