Businesses seeking to cut costs while satisfying needs for faster data rates are driving demand for carrier Ethernet. Bolstering the technology are advanced specifications, increasing its appeal among some wireless carriers.
But while cell backhaul is a major application, the overall market is more widespread.
"Organizations that buy, whether they are a small-to-medium business (SMBs) or a large enterprise, are all using WAN (wide area network) facilities," Michael Howard, co-founder and principal analyst, Infonetics Research, said. "Traffic has not gone down during the downturn."
The migration of Ethernet technology from the local area network (LAN) into the busier WAN is timely, especially given today’s increased sensitivity to costs. "(Ethernet) is typically 20 to 30 percent lower (in cost) than private lines, frame relay or ATM," Howard said.
This interplay of business and technology has given competitive service providers an opening. "MSOs haven’t made a huge dent in AT&T and Verizon’s businesses," Howard said. "But they are there…Ethernet is the principal vehicle they are using."
What’s the score?
The game is on, pitting not only Ethernet against more established competitors, but also service providers of various stripes against each other.
According to Vertical Systems Group’s mid-2009 market analysis of business Ethernet, Cox Communications and Time Warner Cable came in fourth and sixth, respectively, based on retail customer port installations. Overall, however, the numbers showed incumbent carriers totaling more ports than MSOs and other competitive providers combined.
That sector has been growing rapidly. Current Analysis estimated that the business Ethernet market grew by 43 percent in 2008. The MSO piece was minor: Cox and Time Warner held only 16 percent, and Comcast’s share was negligible. But there is upside potential.
"There is a lot of market share to be had by cable," David Hold, senior analyst of network services, Current Analysis, said during a CTAM panel in April.
As a group, MSOs and their business services affiliates have set the lofty goal of reaching the $10 billion mark in business revenue by 2011. By itself, Cox is on track to hit $1 billion in 2010, according to Cox Business VP Phil Meeks, who briefed reporters at the Cable Show.
In the New York metropolitan area, Optimum Lightpath, a subsidiary of Cablevision Systems, has been making inroads with metro Ethernet since adopting it in place of legacy TDM and SONET-based technologies in 2005. Part of Optimum’s success can be attributed to an attention to detail.
"When you develop products in a business ecosystem, you have to take them apart by vertical," Glenn Calafati, director of product marketing, said. "A financial institution might be all about latency and packet loss. Healthcare…about bulk bandwidth."
To figure out what a business needs, follow the money, Calafati said. "What are the customers’ spending habits? How do they use their technology? What is the driver causing them to source the service? Try to shape your product around it."
Consider multi-site businesses hamstrung by complicated billing. In August, Optimum addressed that market segment with a virtual private ring service, providing metro Ethernet-based communications for companies with three or more locations over a dedicated network for a flat rate fee.
"There is a significant financial benefit to buying in bulk," Calafati said. "This construct makes the planning of a network easier. Financial decisions about the network are less burdensome."
There are multiple physical units provisioned at each site that can be dynamically managed. "The (business) can shift bandwidth. If they have three nodes on 500 Mbps, they can decide they want all 500 Mbps between two locations and then a week later distribute it across all three," Calafati said.
If you fiber it…
From a mobile operator perspective, demand is growing so quickly the current TDM-based infrastructure can’t keep up at an acceptable cost point.
"Backhaul is 60 to 80 percent of overall spending for wireless providers," Nan Chen, president and board director of the Metro Ethernet Forum said. "There is no better technology than carrier Ethernet in terms of cost per bit. It is a three-to-one ratio compared to traditional technologies."
With smart phones and other wireless devices driving data traffic, connection requirements can jump from 2 to 3 Mbps to 10 to 15 Mbps, making Ethernet a logical choice. "The problem is that most Ethernet runs on fiber and 75 percent of cell sites are on copper," Chen said.
The incumbents know this. AT&T and Verizon plan to fiber 90 percent of the cell sites they own in the next five years, said Howard, of Infonetics Research. That raises the bar for competitors, but the near-term opportunity remains. "Five years is a long time," he said. "AT&T or whoever will use whose ever fiber they can get."
"Most Ethernet runs on fiber and 75 percent of cell sites are on copper." Nan Chen, Metro Ethernet Forum
MSOs already are engaged. When Brian Roberts, CEO of Comcast, spoke about the company’s earnings for the second quarter 2009, he noted agreements with wireless carriers covering 2000 towers.
Cox Business wouldn’t give numbers when asked, but Cox Senior Product Development Manager Jay Clark did note that it has been providing backhaul for more than 15 years over its fiber optic infrastructure using SONET transport equipment and has been deploying Ethernet backhaul at a "number of towers across the country."
At the same time, Cox is building its own wireless network, a situation akin to that of Rogers Communications, whose cellular towers connect to fiber deployed by Rogers Cable. For its part, Bright House Networks has spoken of the benefits of using Ethernet passive optical network (EPON) technology for cell backhaul. (See the February 2009 issue of CT.)
The reason is that PON is a point-to-multipoint technology, said Yanming Liu, chief marketing officer, Hitachi Communication Technologies America. With it, one fiber generally can serve 32 or 64 customers depending on the bandwidth requirement. But there’s more coming.
Multi-wavelength (MW) PON offers "four times more users or more bandwidth vs. standard PON," Liu said.
While MW-PON typically leverages coarse wavelength division multiplexing (CWDM) optics, another approach being adopted by at least one large up-and-comer in the backhaul market is to use more fiber-efficient dense (D) WDM technology.
Despite the benefits of carrier Ethernet, an MSO can bring fiber to the cell tower, but can’t make the wireless operator migrate.
"One of the biggest challenges in Ethernet backhaul has been adoption by wireless carriers. SLA requirements for T-1s are cut-and-dry as to how it is delivered, and it is reliable. With Ethernet, there are a lot of different flavors that can be deployed. The large challenge any operator has is meeting the SLA requirements for the wireless operator," Cox’s Clark said.
Infonetics recently reported that mobile operators have yet to be convinced that related quirks have been worked out for 3G. "Carriers are not yet comfortable with the timing and synchronization of IP Ethernet products," Howard said.
The Metro Ethernet Forum addressed this issue as part of MEF 22, Mobile Backhaul Implementation Agreement (IA), released in January 2009. However, Phase 1 of the IA only specifies requirements related to timing distributed via packet-based methods. Synchronous Ethernet will be tackled later, but future phases will not study timing distributed via GPS or legacy TDM.
Phase 1 of the IA examines different use cases for deploying Ethernet for backhaul, Chen said. The idea is to sort out the various needs of wireless carriers. Some want to move all traffic to Ethernet using circuit emulation for voice, while others want to continue utilizing SONET, for example.
"Voice is so critical so they want to keep that (SONET infrastructure). They can design a network in parallel for backhaul," Chen said. "How to leverage (Ethernet) is a matter of preference…There is no universal way to say this is the basic model."
This is playing out for cable in the form of hybrid solutions. "We have used class-of-service markings to create bulk bandwidth tunnels that could create circuit-emulated DS1s and also provide Ethernet connectivity," Calafati said. "Since they pay one price for connectivity into the cell tower, as they disconnect DS1s, they can push the bandwidth allocated for DS1s over to the Ethernet connection."
While a big fat pipe is Ethernet’s calling card, scaling and provisioning hold additional advantages. "You can buy a smaller percentage of bandwidth on that (100 Gigabit) port initially," Manish Gulyani, Alcatel-Lucent senior director, business services strategy and marketing, said. Then the service provider can offer additional bandwidth on a short turnaround time."
Residential up next?
While wireless operators are looking for different types of solutions, MSOs have begun asking vendors for carrier Ethernet platforms that can be used for both business and residential customers.
"Because of the Cap and OpEx involved, they are looking to converge their networks into one so they can utilize their investment to get (multiple) streams of revenue," Shai Perach, CTO, ECI Telecom, said. The challenge for vendors is keep it simple.
ECI’s approach includes a GUI-based management system that can manage the optical and data layers. "The idea is to have control of both layers in order to provide performance," Perach said.
How best to align Ethernet and optical technologies to serve business and residential customers is a big question. Perhaps the big question for MSOs and their technology partners as they approach the next decade.
Leaving aside residential, Ethernet has a more targeted, yet critical role in enabling MSOs to serve businesses today, exploit a near-term backhaul opportunity and hit an ambitious $10 billion target.