Counting the Cost of Ethernet Services

Carriers looking to provide Ethernet services might get ambushed by low price expectations

October 14, 2004

2 Min Read
Counting the Cost of Ethernet Services

Ethernet services are in the cards for most service providers, but the cost of add-ons such as QOS and managed protection is a big issue, according to the "2004 Survey of Ethernet Service Providers" published by Heavy Reading, the paid research arm of Light Reading.

The report, released today, examines carriers' aggregated expectations for Ethernet services, grilling them about the types of services to be offered and the carriers' attitudes toward the perceived pros and cons of Ethernet. The report also correlates the findings with those of a July survey that examined Ethernet services from the enterprise point of view.

Most respondents said their companies plan to offer Ethernet services by the end of next year, if they don't already, and it's clear that they see Ethernet growing at the expense of traditional Layer 2 services such as Frame Relay and ATM. The economics of those services are far from settled, however.

Big questions arise concerning quality of service (QOS) and managed protection, two features associated with traditional telco services. These don't come for free in Ethernet -- and yet, users might demand them for free.

In July, a Heavy Reading survey of enterprises found that 31.6 percent of respondents believed Ethernet QOS shouldn't cost extra. Another 38.5 percent said they wouldn't pay more than a 10 percent premium for QOS. Managed protection services got even less love. The July survey found 71.8 percent of respondents expecting to pay zero for managed protection, in some cases (12.9 percent of all responses) because they just didn't need it.

So, carriers might have to pony up the costs of QOS and protection without getting more revenues in return. The punch line is that those extra costs remain undetermined. In the survey, 34.1 percent of carrier respondents said they didn't know what it would cost to provide QOS for Ethernet services, and 44.5 percent said the same for managed protection on Ethernet private lines.

Other carriers seem to think they'll be able to recoup the costs with premium prices -- an option that contradicts the enterprise survey. For example, 26.2 percent of carriers surveyed said QOS would increase the cost of Ethernet services by 10 percent to 25 percent. And 25.2 percent believed the price to customers could be raised by a like amount if QOS were added.

— Craig Matsumoto, Senior Editor, Light Reading

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For further education, visit the archives of related Light Reading Webinars:

  • Metro Ethernet Services: What Customers Want

  • Targeting SMEs With Ethernet Services

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