Q&A: Equinix – Carrier Ethernet Exchange

5:00 AM -- With Ethernet Expo Americas 2010 in NYC coming up on November 2 and 3, I had the opportunity to discuss Equinix Inc. (Nasdaq: EQIX)’s Carrier Ethernet Exchange with Jim Poole, general manager of global networks, mobility, and content. Jim is representing Equinix on the following Expo session during the morning of Wednesday, November 3: "Carrier Ethernet Exchanges – The Catalyst for Market Growth." Equinix’s chief marketing officer, Jarrett Appleby, will be giving an Expo keynote on the same day, titled "Promoting Your Ethernet Services to the Global Marketplace."

Equinix is a global provider of interconnection and other data center services, including the Carrier Ethernet Exchange that is offered within its carrier-neutral International Business Exchange (IBX) data centers. A large amount of the world’s Internet traffic flows through the firm’s Internet exchange points.

Equinix announced its Ethernet exchange development program in October 2009 and officially launched its Carrier Ethernet Exchange in April 2010. The exchange leverages Alcatel-Lucent (NYSE: ALU)’s popular 7750 Ethernet service routers.

The following are highlights from my interviews with Jim and members of the Carrier Ethernet Exchange team:

Heavy Reading: Can you briefly describe what motivated Equinix to become involved in the emerging Ethernet exchange market and highlight the key benefits that you believe the exchange will bring to your customers?

Equinix: We view Ethernet Exchange as a natural component of our interconnection business. Since Equinix’s founding over 10 years ago, we’ve been providing marketing leading Layer 1 (fiber & copper cross-connects) and Layer 2 (our Internet exchange) interconnection services to our customers. Simply put, our customers expect us to be in this business.

We see at least five key benefits. First, there is capex efficiency through many-to-many NNIs. Second, we offer a faster time to market. You only need to map the technical characteristics of your service once with Equinix. Subsequent decisions regarding service-level mapping can be implemented according to simple business rules. This simplifies and shortens the time to activate new partners. Third, you have the creation or expansion of your wholesale channel. Listing your building access on the Equinix portal is an inexpensive and highly effective way to attract buyers among our base of over 3,700 customers. Fourth, the exchange simplifies access management for smaller carriers, value-added resellers, and cloud providers. And fifth, the exchange lowers the barrier to entry to potential new markets. New markets usually require extensive discovery, negotiation, and capex commitments. The Equinix Carrier Ethernet Exchange makes this process both less expensive and fast.

HR: Last year I had a chance to visit one of your IBX Centers in Ashburn and walked way thoroughly impressed with the scale of your operations. Can you comment on the physical assets that Equinix brings to the game and how you are leveraging that on a global basis for your Carrier Ethernet Exchange?

Equinix: Layer 2 switching fabrics are part of our DNA at Equinix. We’ve been running exchanges for more than 10 years. That’s more than a decade of operational expertise. If you look at the numbers, our global platform includes 90 properties across 35 metros. We’re in 11 countries. We work with 595 unique networks and have approximately 3,700 customers in the content, financial services, cloud, and network provider industry. People also choose Equinix because of who else is present. With our Carrier Ethernet Exchange and its new customer portal, Equinix Marketplace, they see the inherent opportunity to connect with partners and bring their services to market faster and to a wider audience -- whether or not they have a dedicated wholesale unit as part of their business.

HR: In how many markets do you plan to offer the Carrier Ethernet Exchange service, and in which markets are currently active?

Equinix: We intend to roll out the exchange in 19 metro markets by the end of 2011. Right now, we’re active in Los Angeles; New York City; Chicago; Washington, D.C.; Silicon Valley; London; Paris; and Tokyo. You’ll see us launching in four to five additional markets in North America and Europe before the end of this year.

HR: Are you carrying traffic within the different markets that are active today?

Equinix: We are running traffic on the service router platforms in multiple markets today. Mostly, participants are running test traffic. We’ve basically focused on getting people onboard and talking with each other as a first step.

HR: How many companies are participating in your exchange, and what’s the geographic mix?

Equinix: We now have 36 customers, including the initial 24 companies that participated in our development program and another 13 that we have added in recent quarters. We expect to add quite a few more participants before the end of 2010.

We have a balanced geographic distribution, with about 50 percent based in North America and 50 percent outside of North America. The announced participants can be found in the Carrier Ethernet Exchange section of our Website. They include a number of operators participating in the Ethernet Expo—such as AboveNet, Level 3, Reliance Globalcom, PacketExchange, Sidera Networks -- and many others based in the US, Canada, Europe, and Asia.

HR: What’s the mix in terms of buyers and sellers?

Equinix: We have a good distribution of sellers with network footprint and buyers who are looking to extend their off-network reach.

HR: You had a press release from September that caught my eye. It involved the participation of Glowpoint, which is offering your exchange customers direct access to cloud-based managed video services. It sounds like you are picking up some interest in the exchange beyond the traditional telecom service providers. Can you elaborate on that a bit?

Equinix: We actually are seeing a fair amount of interest outside of the carrier-carrier dynamic. We have cloud service providers and network service providers who have independently asked us to make introductions. Some of the cloud providers are looking to use the exchange as a private access aggregation method. We have had discussions with financial data distribution firms who are interested in using the exchange to help hit their P&L targets after they meet their minimum volume obligations with their major Ethernet service provider. And we have had a number of network-oriented systems integrators that have signed on to piece together an end-to-end solution using the best rates possible. Again, when you’ve been successfully running exchanges for more than a decade, have a global platform in place, and have deep insight into a customer base stretching across many vertical markets, you have these types of architecture conversations.

Also, I should mention we have seen interest in the exchange from certain cable MSOs that traditionally have not had wholesale sales channels.

HR: How do you handle a customer who wants to connect in one market like New York City and then deliver a service in a different metro market like Silicon Valley?

Equinix: We do not provide a long-haul Ethernet connection between our exchange metro markets. One of our exchange customers -- someone like Level 3, Reliance Globalcom, etc. -- would provide that connectivity.

HR: Before we go, I’d like to say that I appreciated the recent demonstration of your Marketplace Web service portal. It looks to be a promising, powerful tool for your exchange customers. Any closing comments you would like to share about that?

Equinix: The Equinix Marketplace for Equinix Carrier Ethernet Exchange gives our customers the ability to search and discover new partners and locate Ethernet-based services where they are required. Carriers can create storefronts to market their wholesale Ethernet services to other carriers -- activities like uploading lit building lists and responding to requests for quotes. Marketplace can also be used to shop for Ethernet services from other carriers, request and manage quotes for services, and search to see which carriers serve specific locations. As we talked about, wholesale is taking on a larger role in Exchange. Equinix Marketplace helps service providers that do not necessarily have a dedicated wholesale team take advantage of the commercial opportunities in a fraction of the time it would take to provision outside the Exchange. We’d be happy to show your readers a demo of Marketplace at the show. We’re at Booth 238. Or they can visit http://www.equinix.com/data-center-services/interconnection/ethernetexchange/

HR: Thanks for taking time to chat. I look forward to catching up with you and your colleagues in New York.

— Stan "EtherMan" Hubbard, Senior Analyst, Heavy Reading, and Chairman, Ethernet Expo Americas 2010

Interested in learning more on this topic? Then come to Ethernet Americas 2010, Light Reading's eleventh Ethernet event, designed to meet the information needs of service providers and enterprises that are working out what next-generation services and applications to deploy, and what infrastructures will help them do this in the most cost-effective and productive manner. To be staged in New York, Nov. 2 & 3, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.

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