metro ethernet strategies in a web 2.0 world

© New Paradigm Resources Group, Inc. January 21, 2009

Metro Ethernet Strategies in a Web 2.0 World

New Paradigm Resources Group, Inc.30 S. Michigan, Suite 700Chicago, IL 60603(312) 980-7848www.nprg.com

http://www.nprg.com/

© New Paradigm Resources Group, Inc.

The Metro Ethernet Sector in Context1

Metro Ethernet’s Evolving Role in a Web 2.0 World3

4

5

A Closer Look at the Metro Ethernet Arena2

Metro Ethernet Strategiesin a Web 2.0 World

Question and Answer -- Along the Way

Metro Ethernet Market Summary & Outlook

Informed Direction Within aChanging Landscape 2

© New Paradigm Resources Group, Inc. 3

The Big Picture:

Putting the Metro Ethernet Sector in Context


Informed Direction Within aChanging Landscape


The Metro Ethernet Sector In Context:What is Metro Ethernet?

• What is the “Metro Ethernet sector”? • What are the differences between Metro Ethernet

services? Which show the most promise?

• Is Metro Ethernet being used as a replacement for basic data connectivity?

• What long term impacts will service providers feel due to continued growth and adoption of Metro Ethernet solutions?

• What are the general prospects for Metro Ethernet?

Informed Direction Within a Changing Landscape 4


The Metro Ethernet Sector In Context:The Service Provider Universe

Access Solutions

Emerging Wireless

Video Services

Landline Voice & Data

CIOCs

BPL

ILECsCLECs

DSL ISPs

Cable Broadbandand Telephony

VoIP

Special Access

Fixed Wireless

WiFi/WiMax Broadband Wireless

Satellite

IPTV(Competitive Video)

Cable Video

Paid Content


4G Cellular

SaaS

ManagedServices


The Metro Ethernet Sector In Context:The Communications Services Universe

U.S. Services Sector Market Size & Direction (2008)

Source: New Paradigm Resources Group, Inc.



The Metro Ethernet Sector in Context:Key Provider Categories


Pure Play / Fiber Network

Incumbent LECs

Competitive Providers

Cable System Operators

http://images.google.com/imgres?imgurl=http://www.cedmagazine.com/uploadedImages/Ced/articles/051807-optimumLogo.jpg&imgrefurl=http://www.cedmagazine.com/newsletter.aspx?id=148096&usg=__vsHg4I1X_vQ3O135RNvWMASe4Jw=&h=66&w=206&sz=5&hl=en&start=3&tbnid=i1gkoMwO2gG49M:&tbnh=34&tbnw=105&prev=/images?q=Optimum+Lightpath&hl=en&rls=com.microsoft:en-us

http://images.google.com/imgres?imgurl=http://www.telx.com/2007news/sept07/images/cogent.png&imgrefurl=http://www.telx.com/2007news/sept07/features.html&usg=__y-VXJq_WagcQvnKqkt87u8G1nu8=&h=144&w=324&sz=17&hl=en&start=13&tbnid=d_CFwhhg_gsVWM:&tbnh=52&tbnw=118&prev=/images?q=Cogent+Communications&hl=en&rls=com.microsoft:en-us

http://images.google.com/imgres?imgurl=http://www.nefiber.com/images/galleries/d41d8cd98f00b20/807256226728_medium.jpg&imgrefurl=http://www.nefiber.com/american-fiber-systems&usg=__5FZya_L8NaKl4W9wkNbqgqg5FKg=&h=75&w=198&sz=13&hl=en&start=10&tbnid=zLeGmlgs2CrLKM:&tbnh=39&tbnw=104&prev=/images?q=American+Fiber+Systems&hl=en&rls=com.microsoft:en-us

http://www.unitedlayer.com/clients_partners/partnerPhotos/23.jpg


The Metro Ethernet Sector In Context:Metro Ethernet History 101


Bellsouth is first RBOC to roll out

Ethernet over Copper

IEEEE issues call for interest on “Ethernet in the First Mile”

MEF 100th

member

Hatteras Networks founded

NPRG releases first

Metro Ethernet Report

SBC launches OPT-E-MAN

1998: ActelisNetworks founded

Cisco Systems adds optical

Ethernet to Catalyst 4000 family

1999: Ameritech introduces GigaMAN

2002 2004 2005 2006 2007 200820032000 20011990s1970s-80s

1970s: Initial

“Ethernet” LANs

1980:10 Mbps Ethernet

1.0 Standard

1996: Cox offers Metro LAN service

U.S. Ethernet revenue

exceeds $1 Bn

Verizon national VPLS

launch

Reliance Globalcombuys Yipes

Enterprise Services

Optimum Lightpath goes

all- Ethernet

1980s: Client-server

paradigm dominant

AT&T global VPLS launch

Ethernet Services Revenue

Metro Ethernet Forum founded

MCI deploys Tellabs’ Converged Packet Architecture gear,

foundation for WAN Ethernet


Service Characteristics

DSL/Cable Modem T-1 Metro

Ethernet Wavelengths

Growth Potential

Bandwidth Range < 15 Mbps 1.5 Mbps 2 Mbps to 10 Gbps > 1 Gbps

Scalability None Limited High Limited

Price per Bit Moderate High Low to Moderate Low to Moderate

Service Quality Limited High Low to High Carrier-class

ParadigmaticEquipment Modem CSU, IAD Router Multiplexer

Barriers to Entry Moderate Low to Moderate Low to Moderate High

Web 2.0 Potential Moderate but falling Moderate but falling High High

The Metro Ethernet Sector in Context:Comparing Services

Services Comparison

Source: New Paradigm Resources Group, Inc.



A Closer Look at the Metro Ethernet Arena


10


A Closer Look at the Metro Ethernet Arena: Predominant Metro Ethernet Strategies

Carrier Set Strategic Objective

Pure Play / FiberNetwork Oper.

• Disruptive: No legacy infrastructure/services to support

• Target low-hanging fruit, scalable prospects

RBOC• Wide net: Ethernet part of diversified portfolio

• Migration: Bridge customers to next-gen services

Other ILEC • Retention: Preempt disruptive competitor entry

CLEC • Challenge: Enterprise capabilities to mid-market at lower price-points

Cable MSO • Equalizer: Scalable business services with incremental upgrade to existing architecture

Global Providers • Beachhead: Offer comparable international networking on the RBOCs’ own turf



A Closer Look at the Metro Ethernet Arena:Providers & Target Customer Sets

SMB Large Enterprise WholesalePure Play / Fiber Network Operators

RBOC

Other ILEC

CLEC

Cable MSO

Global Providers

Prov

ider

Sec

tor

Customer Segment

= Primary Target


= Secondary Target


A Closer Look at the Metro Ethernet Arena: Key Metro Ethernet Services


Ethernet Private Line (EPL)

Ethernet Virtual Private LAN (VPLS)

Ethernet Virtual Private Line (EVPL)

Dedicated Internet Access (E-DIA)

POP Internet


A Closer Look at the Metro Ethernet Arena: Key Metro Ethernet Services Trends


Ethernet Service Application Trends

EPL• Medical / Healthcare (imaging, patient data)• Education (E-Rate K-12, videoconferencing)• Data centers, storage, disaster recovery

EVPL• Enterprise branch offices (retail, banks)• Financial services & transactions (data transfer)• Mobile backhaul

VPLS • Extend any-to-any communication across MPLS network• Enterprise VoIP networks

E-DIA • Content delivery• Small business (web-centric, multimedia, engineering)


A Closer Look at the Metro Ethernet Arena: Key Market Drivers

Growing end-user acceptance

Bandwidth demand increasing

Lower service pricing: traffic is “just bits”

Equipment quality and pricing

WAN expansion

Bandwidth-intensive applications

Robust SLAs and Classes of Service (CoS)

Services integration / Continued network convergence


Critical Market Drivers include:


A Closer Look at the Metro Ethernet Arena: Metro Ethernet Market by Customer Segment

Share of Ethernet Revenue by Customer Segment(2008)

Informed Direction Within a Changing Landscape

16


A Closer Look at the Metro Ethernet Arena:Metro Ethernet Market by Provider Sector

Share of Ethernet Revenue by Service Provider Set(2008)


ILEC

CLEC

Cable

Pure Ethernet

Fiber Network

Global Provider


Metro Ethernet’s Evolving Rolein a Web 2.0 World


18


Metro Ethernet’s Evolving Role:Characteristics of the Web 2.0 World


Network as Platform

Collaborative

UntetheredMultimedia oriented

Integrate + Mashup

Web 2.0 Elements


Metro Ethernet’s Evolving Role:Where does it fit?

Data

Video

Ethernet

VoIP

SaaS

ManagedServices

Informed Direction Within a Changing Landscape

20

© New Paradigm Resources Group, Inc.Informed Direction Within a Changing Landscape

21

Ethernet SONET SONET

Ethernet

IT Group Telco Group LEC IXC

Technology Group

Communications Provider

Metro Ethernet’s Evolving Role:Shifting the Paradigm

Traditional Paradigm

Emerging Paradigm

IP / Ethernet

TDM


Metro Ethernet’s Evolving Role:Shifting the Paradigm


Bandwidth Services Revenue


0 50 100 150 200 250 300 350

Gig E (1,000 Mbps)

Fast Ethernet (100 Mbps)

Ethernet over Copper (10 Mbps)

Cable Modem (15 Mbps)

DSL (3 Mbps)

Fixed Wireless (10 Mbps)

T‐3 (44.7 Mbps)

DIA T‐1 (1.5 Mbps)

Price Per Bit ($ / Mbps)

Business‐Class Internet Access Pricing

Metro Ethernet’s Evolving Role:Comparative Pricing



Localized CompetitorsOptimum Lightpath

Cox Business ServicesTime Warner Cable

IP Networks

Enterprise LeadersAT&T

Verizontw telecom

Reliance Globalcom

Emerging ThreatsComcastDukeNet

FPL FibernetOther ILECs

Fixed wireless providers

Extensive ChallengersLevel 3

AboveNetCogent Communications

MasergyVertical systems integrators


Port

folio

Str

engt

h

Services Reach

Metro Ethernet’s Evolving Role:Segmenting the Providers


Market leadership in Web 2.0 era will require:1. Diverse Ethernet portfolio2. Scalable bandwidth options3. Robust inter-market networking4. Demonstrable QoS and guarantees

- Including off-net locations (E-NNI)

5. Pricing reflective of value delivered, not legacy pricing assumptions


Metro Ethernet’s Evolving Role:Finding Prosperity in Web 2.0


Metro Ethernet Market Summary & Outlook


26


Summary & Outlook:Metro Ethernet Outlook

Technical enablers…Continued improvement on SLAs and OA&MBandwidth on demandRemote monitoring/fault isolationCircuit emulation and pseudowires

… for growing revenue opportunitiesGrowing wholesale market: Backhaul ready to boom?External Network-to-Network Interface (E-NNI)Ethernet service over copper10GigE productization



Summary & Outlook:Key Takeaways

• Metro Ethernet is an established service option

• Pace of adoption exceeding expectations

• Pricing has stabilized, but disruptors still exist

• Facilitator of other products & network services

• Wholesale market growing as mobile backhaul opportunity materializes


Some thoughts to take away from this discussion:


Need to Know More About the Metro Ethernet Sector?

If you need it, we probably have it:

• Metro Ethernet Track - Continuous Information & Advisory Service

– Sector Analyses (forecasts, market size, trends, emerging strategies, and outlook)

– Research Briefs (strategic analysis of issues affecting the sector as they arise)

– Service Provider Coverage & Profiles (detailed data, information & analysis of the providers)

• Metro Ethernet Sector Analysis Report

• Service Provider Coverage, Analysis & Profiles

Any of these can be ordered by calling (312) 980-4843Informed Direction Within a Changing Landscape 29


Informed direction…within a changing landscape

New Paradigm Resources Group, Inc.

New Paradigm Resources Group, Inc.30 S. Michigan Ave., Suite 700

Chicago, IL 60603(312) 980-7848www.nprg.com

Thank You!

http://www.nprg.com/

metro ethernet strategies in a web 2.0 world

Documents