Find out why the cable industry is so infatuated with the Metro Ethernet Forum, and with Carrier Ethernet—is it a long-term commitment, or just a fling? In April 2006, Cablevision‘s Optimum Lightpath subsidiary became the first cable company to receive Metro Ethernet Forum certification for its Carrier Ethernet services. Since then, the growing relationship between cable and Carrier Ethernet has become regular news.
Does this mark a serious strategic move by the cable industry? Or is it simply a few pioneers trying to reach new markets? Strong momentum Optimum Lightpath kept up its PR momentum – with further certification to MEF 14 performance criteria, with General Manager David Pistacchio’s "call to arms" at the SCTE Business Services Symposium last September for cable operators to become more involved with the MEF, and with the launch of their channel 660 video on demand (VOD) offering, dedicated to spreading the word about Carrier Ethernet services.
But they are no longer singing solo. Time Warner Communications and Cox Business Services also are making headlines for their Carrier Ethernet services. Meanwhile, the MEF’s membership has increased 50 percent in the last year, and cable industry players are increasingly represented, with Arris, Bright House, PhyFlex Networks, ntl TeleWest and Vyyo joining the trend.
Evidence that this is more than just an exploratory exercise is provided by Carrier Ethernet sales figures from Vertical Systems Group. In the second half of 2006, AT&T and Verizon Carrier Ethernet sales boomed, and yet their market share fell as cable companies and competitive local exchange carriers (CLECs) moved in.
"We saw tremendous growth in the new entrants and the smaller and regional players so that, in terms of the percentage of the pie, incumbents’ numbers went down," said Vertical Systems’ Rick Malone. The market leader AT&T saw its share drop from 16.2 percent to 13.6 percent while the large group of "others" selling 26.2 percent of ports now included Cox, Optimum Lightpath and TWC. The Carrier Ethernet promise Ethernet inventor Bob Metcalfe sees this technology as having a long-term future in cable. "MSOs are embracing Carrier Ethernet to provide commercial services and eventually to deliver the residential quadruple play – video, voice, mobile, and Internet – through the deepening fibers of their HFC networks."
Many observers see that the immediate emphasis for Ethernet is on cable’s expansion into the small to medium-sized business (SMB) market.
The business for many cable operators has been evolving recently as deployment of residential voice services has required them to harden their networks, while deepening their expertise in voice and data services. Meanwhile, the demand among SMBs for carrier-class services is taking off. When they look for a provider, there is likely to be cable plant running near their offices.
The attraction of Ethernet to the customer is that it is widely deployed, understood and interoperable, and that means lower cost equipment and less money spent on training and support.
From the operator’s perspective, converging business, residential and wireless networks on the same Ethernet infrastructure offers economies of scale so they can reduce operational and capital costs. Carrier Ethernet is also scalable in granular increments up to 10 Gbps, and work is on-going to define even higher speed Ethernet interfaces. Cable operators can therefore offer a flexible service while cutting costs.
For many cable operators, there’s a catch-up element at work. "Cable companies were lagging behind telcos in providing business services, in part because they had no equivalent to T-1 service," said Nan Chen, president of the MEF. "With standardized services now becoming available through MEF certification, this is changing fast."
The other point about MEF standardized services is that they enable interworking between cable operators who can offer a wider footprint for their customers, spanning many areas and expanding the customer base. This allows a larger scale of operation and the potential to interoperate with telcos to deliver international services for larger enterprises. The cable legacy Cable’s origin, of course, is in residential services. That might have presented an image problem several years ago when selling to businesses, but times have changed.
Many cable operators have been offering some form of business services for several years now. Cox Business Services is 10 years old, generating $500 million annually, and Optimum Lightpath has been running fiber to business for 17 years as primary or secondary providers. The industry’s robust data and voice offerings have further shifted public perception. For the smaller service industries, often sited around residential areas, the cable industry’s legacy becomes an advantage.
As for Ethernet services, when SMBs discover their benefits and look to see who is serving their area, the local cable operator has a good chance of winning.
A greater challenge is winning the customer who’s used to T-1. Here, the problem is not technology so much as resistance to change. The use of pseudowire solutions lets the cable operator deliver both T-1 and Ethernet over the same HFC network.
Pseudowires bridge the gap between HFC and pure fiber access by providing a symmetric high-speed link suited to telephony. Meanwhile, the market itself is shifting to Internet protocol (IP) telephony, with IP private branch exchanges (PBXs) outselling traditional PBXs for the first time this year. Carrier Ethernet today Two key engines are driving the acceleration of Carrier Ethernet. Firstly, the MEF’s work on Carrier Ethernet’s five attributes – standardized services, scalability, service management, reliability and quality of service – distinguish it from its local area network (LAN) ancestry. Secondly comes the MEF’s certification program.
Ken Fitzpatrick, senior vice president of Time Warner Cable Business Services, points out that TWC has MEF 9 certification for its New York City and Portland, ME, metro networks and their regional networks in Ohio, Texas, North Carolina and South Carolina. "This type of certification is beneficial to the customer as it allows us not only to scale this within our organization, but also to scale it across footprints, which is what customers are looking for." Fitzpatrick also said that MEF certification helped establish a foundation for carrier-grade Ethernet services and saves money on testing multiple vendors: "You get immediate assurance from the vendor community that they comply with MEF specifications."
MEF certification gives customers confidence that the cable operator is providing carrier class services, and it gives the cable operator added credibility in the marketplace. More fundamentally, certification helps define a common set of metrics for delivering Carrier Ethernet services, and the MEF service definitions make it easier to communicate with customers about service offerings and present a clear, benefits-orientated quotation. Having a common set of tests already conducted also saves time, and the use of certified equipment simplifies the provider’s choice.
Looking ahead to wider deployments, where the business spans two or more cable companies, MEF certification also increases confidence that the operators’ networks will interoperate and that the service will be uniform to the customer throughout. Geography presents perhaps the greatest challenge to the cable operators, but MEF certification reduces the uncertainty. Where is the resistance? The argument for Carrier Ethernet services is solid, but will the customers buy it?
The MEF’s mission is to accelerate the adoption of Carrier Ethernet and means firstly defining the standards and then providing certification programs to win recognition for those standards. It also means public relations – spreading the word about the benefits of Carrier Ethernet and educating the market.
This PR emphasis is not trivial, for technology adoption is not related purely to technology excellence – there are also human factors of prejudice and inertia to overcome. The CTO who has been working with synchronous digital hierarchy (SDH) or T-1 services so long that he can manage it with eyes shut may not welcome a change even when the technology case is strong.
Inertia aside, some engineers fear that the new Ethernet technology will take more management. Any change throws up challenges and may initially demand extra manpower, but the evidence is that Carrier Ethernet is easier, not harder. The early MEF opex studies suggested a 20 percent cost benefit over synchronous optical network (SONET)/SDH systems, reinforced by Carrier Ethernet’s ability to reconfigure services online without the cost of sending engineers on site.
Optimum Lightpath dropped all its time division multiplexing (TDM) and SONET-based services in 2005. The company found Ethernet easier to install and the equipment cheaper and, according to Lightpath Executive Vice President and General Manager David Pistacchio, businesses "get Ethernet because they know what it is." Simplicity, they claim, is key to their successful offering, and Carrier Ethernet provides that simplicity – they were able to slash their product offering from 3,000 items to 40 items, making it easier to match the product to the customer while simplifying billing. The way ahead Cable’s love affair with Carrier Ethernet is opportunistic, but how long will this window of opportunity stay open?
It isn’t all smooth sailing for cable operators new to this market. Like many exploratory service offerings, beginners are still emphasizing custom solutions, individually built and priced, and this approach won’t scale well. Carrier Ethernet offers flexibility, but the spread of standards will also reinforce demand for clear off-the-peg packages and pricing.
Cable operators don’t just need to move from residential to business customers; they also need to learn the different needs of different sized companies and how best to serve them. Carrier Ethernet services offer good margins, so there is scope for competitive pricing. Margins can also be strengthened by adding new services that the increased bandwidth enables, such as data backup or business class voice over IP (VoIP).
Carrier Ethernet has other uses than commercial services. Ethernet is already the technology of choice for inter-connecting cable operators’ headends and hubs. VOD traffic is distributed over Ethernet, and customer support communications occur over Ethernet. In that sense, cable is now simply offering its customers the same transport that it is already using internally. The cable operator can also leverage the benefits of Carrier Ethernet in its aggregation and content distribution networks.
Meanwhile, the MEF is itself moving ahead. Current plans include a circuit emulation certification program to be announced later his year, with further programs in development including an E-ree service definition for rooted multipoint applications and an aggregation interface to enhance Ethernet support for residential services and greater attention to the external network-to-network interface for international Ethernet services. The new MEF 14 service provider certification will include additional frame delay and loss parameters critical to voice, video and time-sensitive applications. Louise Wasilewski is co-chair of marketing for the Metro Ethernet Forum and VP Business Development at PhyFlex Networks. Reach her at firstname.lastname@example.org.