Are Ethernet Services The Next Big Thing?

With some research firms estimating the metro Ethernet services market will surge 276% to $22.2 billion by 2009, many say it's the wave of the future for service providers. But

June 20, 2005

4 Min Read
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It was only a matter of time before Ethernet broke out of the confines of the local area network (LAN) to become the next big thing in the wide-area network (WAN). After all, the same qualities that have made it the nigh-universal LAN technology since the 1970s have made metro Ethernet services a hot property, and providers are lining up to bring offerings to market.

"One of the main reasons why Ethernet is so popular in the LAN is that it is so simple, so flexible and really cost effective," Verizon Ethernet product manager Carlos Benavides says. "On the WAN, we can offer a very high bandwidth service with QoS (quality of service) at a cost-effective price."

The idea that the network on the other side of the enterprise firewall requires exactly the same kind of management expertise as the one on the inside is pretty compelling. "It means that, theoretically at least, the same network management tools can be used on both the LAN and the WAN," says Forrester Research telecom and networks group vice president Lisa Pierce. "Especially when you go downmarket, the likelihood that you'll have someone on staff who only knows LAN is higher."

Add to that the possibility of much more flexible provisioning, and it looks like Ethernet services could be a big seller. "I think people are excited by the possibility of being able to grow access dynamically, as needed," Pierce says. "Now, if you have a 100 Mbps line and want to grow to 1000 Mbps, for example you have to go through a whole provisioning process."

With converged applications like VoIP putting every heavier and constantly increasing loads on network connections, it's not surprising that Ethernet services have captured the interest of enterprises, if not, quite yet, their subscription dollars. However, that's going to change, according to a report released by Infonetics Research last month. The firm forecasts that the still-young Ethernet services market will surge 276% to $22.2 billion by 2009. That's not an inconsiderable amount of change representing a not inconsiderable amount of users.

For a company like Verizon, with 11.2 million miles of fiber optic cable, and more on the way, Ethernet services could represent the next big networking business opportunity - at least they hope so. The company has spent $73 billion in network upgrades since 2000, at least partly to address what it sees as an insatiable and growing demand for Ethernet."Our customers are demanding the service," Benavides says. "LAN/WAN connectivity, storage and other applications are driving up the bandwidth demand. Second-phase customers are doing converged applications and want access to our MPLS (multiprotocol label switching) network. But this doesn't do us much good if we can't reach customers."

However, Pierce cautions that, in all the Ethernet excitement, the networking industry needs to take a reality check. Even the potential for metro Ethernet is far more speculative than real right now, despite what carriers like Verizon might like to think, she says. "You can talk about putting fiber everywhere, but 11.2 million miles doesn't mean you have fiber everywhere," Pierce says. "Having fiber in the ground is a prerequisite for metro Ethernet, but that doesn't necessarily mean it's available."

Indeed, Pierce points out that the last mile connections to the enterprise LAN remains an obstacle to widespread adoption of Ethernet services. It may be coming, she says, and Ethernet is already popular in the financial services and data center industries, but the wider market is not exactly holding its breath. "It's available in certain markets and only in certain places in these markets," she says. "And enterprise interest is subdued. That's mostly because it's far from ubiquitous, and companies tend to like to standardize technologies in the WAN."

The bottom line, Pierce says, is that metro Ethernet is, for now at least, a vendor driven market. While she concedes that enterprise interest in Ethernet services is growing, albeit slowly, the telecommunications carriers are more concerned with making an end-run around potential rivals in an increasingly competitive networking market.

"I think the reason you see incumbents pushing it is to minimize the penetration of companies like Cogent," Pierce says.Having said that, Ethernet promises to play a major role in wide area networking in the next few years. While Benavides says that it probably won't supplant other, more established technologies for some time to come, if ever, Ethernet will be a big part of Verizon's " and other carriers' " portfolios. As for whether the carriers are responding to or leading market demand, at the end of the day, Pierce says, it doesn't really matter. "You have to put it out there for customers to take it up," she says.

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