Ethernet Exchanges Shift From Public to Private

NEW YORK -- Ethernet Expo 2012 -- Just three years after it was all the rage at Ethernet Expo Americas 2009, the public Ethernet exchange concept has been pushed onto the back burner by the thing it was trying to light a fire under -- long, highly proprietary carrier purchasing patterns.

Instead, as Ethernet Expo Americas 2012 kicks off, Ethernet exchanges are shifting away from being public marketplaces for physical Ethernet interconnection to focus on software-based or cloud-based back-office processing to support privately created interconnections.

“We would not describe ourselves as an Ethernet exchange,” says Paolo Gambini, VP of product management and development at Inteliquent , a statement which shows how much things have changed. Inteliquent started life as Neutral Tandem Inc. (Nasdaq: TNDM), which shortly after its acquisition wholesale operator Tinet in September 2010 described itself as “the largest Ethernet exchange in the world.” (See Neutral Tandem Integrates Tinet.)

Gambini says that merger confirmed Neutral Tandem’s move away from the exchange model, enabling it to leverage Tinet’s wholesale Ethernet platform and its EtherCloud Network-to-Network Interconnection (NNI) platform.

The Neutral Tandem/Tinet merger came at a time when the industry was still excited about the exchange concept, and not long after the model received what was thought to be a major boost from the MEF ’s approval of an Ethernet NNI specification.

“We thought the public exchanges would be a bigger market by now,” says Nan Chen, president of the MEF, and co-founder and president of CENX Inc. , which made its debut as a public Ethernet exchange in November 2009. (See Ethernet Gets a CENX View.) Chen says: “The exchange business has evolved from public operator-neutral exchanges into private exchanges. The public concept till holds great promise, but not as strong as expected. Telecom carrier buying patterns are hard to change. The slow uptake had to do with too many people wanting to sell, not enough wanting to buy.”

"A big reason carriers didn’t buy into the original concept is they didn’t want to open themselves to thousands of potential business relationships; they just wanted a handful of close partners," Gambini adds.

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