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Larger SPs Still Browsing Ethernet Exchanges

Carol Wilson
6/29/2010

Major Ethernet service providers are intrigued by the proliferation of Ethernet exchanges, designed to enable faster and easier interconnection of Ethernet services, but many are taking a wait-and-see attitude before joining one.

Even Verizon Enterprise Solutions , an announced user of the CENX Inc. exchange, says its exchange involvement is still in pilot mode. (See Verizon Boosts Biz With CENX Connection).

"Exchanges are another arrangement we are looking at as part of [a broader] interconnection strategy," says Mike Volgende, director of Ethernet services, for Verizon Business. "Right now, it's in a pilot phase -- a little bit better than proof-of-concept -- but we are still working out requirements with exchanges."

CENX has been the most active exchange in terms of announcing service provider participants, naming XO Communications Inc. and Covad Communications Inc. as well as Verizon. (See Level 3 Teams With CENX, XO Connects With CENX, and CENX Signs Up Covad.

Other Ethernet exchanges opening their doors this year include Equinix Inc. (Nasdaq: EQIX), which was first to publicly announce itself, Telx Group Inc. , and Neutral Tandem Inc. (Nasdaq: TNDM). (See Equinix Offers Global Ethernet Peering , Neutral Tandem Takes on Ethernet Peering, and Telx Adds an Ethernet Exchange.

Ethernet exchanges enable peering relationships among Ethernet service providers, letting them interconnect without having to set up individual business relationships with every other carrier member of an exchange. Their appeal is obvious: Ethernet service providers are trying to provide end-to-end services over the broadest possible geographic footprint, and they need to use one another's networks to get that reach.

But some service providers, such as AT&T Inc. (NYSE: T), say they have extensive coverage based on the relationships already in place with other service providers.

"We are still in monitoring mode where the exchanges are concerned," says Bob Walter, executive director of Ethernet product management for AT&T. "We've got a pretty broad range of interconnections in place, both domestic and global, with a number of suppliers and service types. We have a pretty good coverage rate -- we're in upper 90s with the kind of relationships we have today."

NTT America Inc. also is interested but not yet certain how connecting to an Ethernet exchange might help.

"A little bit depends on how the exchanges get implemented and what piece we can take advantage of directly and which ones are more arm's length," says Michael Wheeler, vice president of the Global IP Network for NTT America. "Like many other things we do on the facilities side, we work with a lot of vendors for many different things. We could choose to work with a number of them [Ethernet exchanges] but we haven't made that decision yet."

By contrast, Covad joined CENX specifically to broaden its footprint as it moves to offer wholesale Ethernet services to other service providers more aggressively.

Connections with international service providers, in particular, work well through an Ethernet exchange such as CENX, says Jeff Brown, vice president of Covad Carrier Services. Instead going through a lengthy process to interconnect and reach their customer locations in the Los Angeles area, the first place where Covad and CENX are connecting, these service providers can connect more rapidly to meet their customer demands.

"CENX, because of its MEF [MEF ] background and expertise, has something like the Good Housekeeping seal for those service providers," Brown says.

In the near term, smaller companies may be more attracted to exchanges as a quick means to extend their reach.

Heavy Reading analyst Stan Hubbard sees longer-term value for exchanges as the Ethernet market matures.

"Today, there is no central place you can go and find out the full range of Ethernet connectivity and service feature options available within a particular market," Hubbard says. "Exchanges are in a position to address this challenge while speeding service interconnection and accelerating Ethernet service adoption in major markets around the world."

One of the issues for those waiting to see is determining how the exchanges work and whether they prove to be the time and cost savings that they advertise.

According to Hubbard, exchanges should perform key important functions, including:

  • Helping easily identify the locations that are connected to the exchange network in the market or markets of interest
  • Indicating what connection speeds are available, depending on the type of access technology used
  • Providing multiple protection options to ensure service reliability requirements are met
  • Providing multiple class-of-service/quality-of-service options that can be mapped to the CoS/QoS of the services in the subscribing carrier's own portfolio
  • Making it easier to see how a service is performing on an end-to-end basis
  • Scaling with the subscribing carrier's expansion plans within a metro market, within a country, or around the world.


"Ideally, I’d like to be able to pull up a list of service providers participating in a particular market and have the exchange tell me what CoS/QoS options each of them offers and how robust their SLA guarantees are," Hubbard says. "If exchanges really catch on, they could make individual markets very dynamic and more competitive because you’ll be able to make side-by-side comparisons of offerings, identify strong potential partners, and weed out the weaker players."

— Carol Wilson, Chief Editor, Events, Light Reading

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