November Defining the Value of Ethernet Services

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1 November 2013 S P E C I A L R E P O R T Defining the Value of Ethernet Services

2 Table of Contents Introduction... 3 What Are Ethernet Services?... 4 Service Types Service Domains What Are the Benefits of Ethernet?... 6 Why Are Businesses Buying Ethernet?... 7 Demand Drivers What Are the Applications for Ethernet?... 9 What Are the Challenges With Ethernet Services? What Should You Look for in an Ethernet Service Provider? Provider Types Market Leaders Selection Criteria Defining the Value of Ethernet Services 2

3 Introduction The buzz around carrier Ethernet is understandable. Ethernet is highly scalable, extending from megabit to gigabit speeds to accommodate growing bandwidth demand for typical WAN applications like site-to-site connectivity and Internet access, as well as even more bandwidth-hogging ones like video, medical imaging and access to cloud-based services. In addition, Ethernet offers the flexibility to order incremental bandwidth in much more granular chunks than is available with traditional circuits. These alone are attractive traits, but they are shored up by the fact that Ethernet is a familiar and simple network technology invented in the 70s for data communications in the local area network and that its ubiquity in the LAN gives it a lower cost basis than other technologies. As a result Ethernet services are in increasing demand by businesses like yours. One forecast says that U.S. enterprises purchased more Ethernet services than legacy services for the first time in This Report will shed more light on the value of Ethernet services for your business. Defining the Value of Ethernet Services 3

4 What Are Ethernet Services? Initially, carrier Ethernet extended low-cost LAN-based Ethernet to the WAN. Today, it offers various bandwidth and QoS features that make it useful as a transport for your voice and video applications as well as data. Ethernet services are delivered as point-to-point or multipoint services over dedicated or virtual connections. Ethernet services are available over various access methods, such as high-speed fiber, DSL, cable, wireless and even traditional T1 lines, so it can be used at a majority of your office locations. It s widely available in speeds from 1Mbps to 10Gbps and in some cases up to 100Gbps to meet your growing bandwidth needs. Service Types Ethernet services are marketed under various namesm, such as transparent or native LAN, Ethernet, Gigabit Ethernet, GigE, metro Ethernet, Ethernet private line, Ethernet virtual private line, Layer 2 virtual private network, Ethernet access and virtual private LAN service, but there are just a few common Ethernet service types: E-Line, or Ethernet Private Line (EPL), is a point-to-point service using dedicated bandwidth, that allows you to privately transmit mission-critical data between locations. EPLs are idea for bandwidth-intensive applications and are the most popular Ethernet service due to their simplicity. A point-to-multipoint (hub-and-spoke) variation using shared bandwidth commonly is referred to as Ethernet Virtual Private Line Service (EVPL) Customer Premises Ethernet Private Line Service E-Line Point-to-Point Service UNI UNI Carrier Ethernet Service E-line services create one Ethernet virtual connection (EVC) between user network interfaces (UNIs). Defining the Value of Ethernet Services 4

5 E-LAN, or Ethernet LAN, service enables any-to-any communication between all customer locations via a multipoint-to-multipoint Ethernet connection. An E-LAN can be used to create a transparent LAN service, such as a multipoint Layer 2 VPN. A variation on this is E-Tree, which is rooted multipoint connectivity (hub and spoke) and is used for broadcast applications where services flow from a centralized point. Ethernet LAN Service E-LAN Multipoint Service UNI UNI Customer Premises UNI UNI Carrier Ethernet Service E-LAN services create multiple Ethernet virtual connections (EVCs) between user network interfaces (UNIs). Ethernet access services are point-to-point services that connect an enterprise customer with a service provider point of presence to support capabilities, such as dedicated Internet access or connectivity to Layer 3 VPNs. VPLS, or Virtual Private LAN Service, is a LAN extension service that runs over an MPLS. It also can be thought of as a Layer 2 multipoint VPN. Unlike Layer 3 VPNs, VPLS does not require premises-based routers. Instead you can use an Ethernet switch to connect to the service provider network. You also can use any type of access link that supports Ethernet communications. (Note: Some service providers may market VPLS service as an E-LAN service and may not use the term VPLS.) Service Domains Ethernet services are available for different domains or geographies where you need connectivity, including: Access Network Often referred to as the last-mile, this is the connection between your building and the service provider network. Metro Area Network (MAN) Just as it sounds, this is connections between your office locations within a metropolitan area. Wide Area Network (WAN) This includes the connections between locations that may be across the country or even the globe. Defining the Value of Ethernet Services 5

6 What Are the Benefits of Ethernet? Ethernet services offer many advantages, including: High Bandwidth. When first introduced, Ethernet supported a data rate of up to 10Mbps. Later Fast Ethernet increased 10 times to 100Mbps and, later still, Gigabit Ethernet increased that 10 times to 1,000MBps. Today, gigabit speeds up to 100Gbps are possible (though most businesses don t require that much bandwidth), and carriers now are looking at deploying technology that supports 400Gbps. Scalability. Ethernet bandwidth can be increased on a granular basis up to the physical port size. In contrast, growing a TDM network from DS1 (1.5Mbps) to DS3 (45Mbps) to OC3 (155Mbps) requires forklift upgrades. Low Latency. Ethernet is switched rather than routed, so it generally has lower latency and generally is considered preferable to router-based protocols such as MPLS and VPN in settings where milliseconds are crucial. Low Cost. Ethernet is able to handle your growing speed and bandwidth requirements for less money than other connectivity methods. For example, a T1 delivering 1.5Mbps costs around $300 per month, while 3Mbps asymmetrical Ethernet costs about the same. That means you can get twice as much bandwidth for the same price. This is great news if you are using bandwidth-intensive apps, such as voice, video and cloud services. Ethernet is able to handle your growing speed and bandwidth requirements for less money than other connectivity methods. Defining the Value of Ethernet Services 6

7 Why Are Businesses Buying Ethernet? Demand Adoption rates for Ethernet services are soaring, propelled by its cost effectiveness, high-bandwidth scalability, availability and overall flexibility for connecting to cloud and data center virtualization applications, according International Data Corp (IDC). The research firm s latest forecast, published in October 2013, found the total U.S. Ethernet revenue will increase from $6.2 billion in 2013 to $10.1 billion in A September 2013 forecast from The Insight Research Corp. shows similar growth from nearly $5.5 billion in 2013 to more than $13 billion by 2018 with a compound annual growth rate of 19 percent. In all, Insight predicts U.S. enterprises will spend more than $49 billion over the next five years on Ethernet services. The research firm also noted due to price declines of 10 percent or more per year, Ethernet revenue is growing slower than traffic. IDC noted widespread adoption of Ethernet services across domains wide area networking, metro area connectivity and access. Furthermore the research firm is finding increasing demand for ever greater speeds. Today enterprises are increasingly utilizing 100 megabit, gigabit, 10 gigabit and even some 40 gigabit Ethernet services for their domestic and international WAN networking, said Nav Chander, IDC s research manager covering U.S. enterprise communication services. We are also seeing a lot of U.S. enterprises upgrading their Ethernet bandwidth and adding more applications and business locations on-net because of the economics and faster time-toservice compared to the alternatives. U.S. Ethernet Services Revenue Growth $6.2 BILLION $10.1 BILLION Source: International Data Corp., October 2013 Drivers According to Insight Research, Ethernet s popularity is driven by its ability to meet growing bandwidth demands at lower cost and with greater flexibility than legacy TDM-based services. In addition, IDC said enterprises rank security as one of the most important features of Ethernet, followed by access to their IP VPN, and service monitoring and reporting. Defining the Value of Ethernet Services 7

8 The primary drivers of Ethernet adoption among U.S. enterprises are high-bandwidth applications, such as data center interconnectivity, disaster recovery/business continuity and data storage replication. Indeed, for enterprises, implementation of high bandwidth Ethernet connectivity between data centers is one of the fastest growing requirements, IDC said in its October 2013 report. The research firm noted that more medium businesses also are adopting Ethernet as they migrate to VoIP, employ storage networking and access cloud-based services. Similarly, in its midyear 2013 Ethernet market share report, Vertical Systems Group noted Ethernet providers cited an uptick in demand for connectivity to private clouds using E-Line services. The fastest growing offerings during the period (first half of 2013) were Ethernet access to IP MPLS VPN services and cloud connectivity. Defining the Value of Ethernet Services 8

9 What Are the Applications for Ethernet? Ethernet is well suited for supporting a wide range of applications, including: Private Line Replacement. One of the biggest uses for Ethernet is to replace your private lines using T1 circuits or other legacy technologies, such as frame relay and ATM. Dedicated Internet Access. You also may opt to use Ethernet virtual private lines to connect to your Internet provider. If you have multiple locations, the service provider can provision multiple virtual connections each connecting to a separate customer location over a single physical connection into the Internet provider s PoP (see diagram, Ethernet Dedicated Internet Access, below). Ethernet Dedicated Internet Access Metro Ethernet Network UNI 1 Service Multiplexing UNI 2 EVC 1 EVC 2 UNI 3 ISP POP Ethernet access provides an Ethernet virtual connection (EVC) from the user network interface (UNI) to the carrier Ethernet network and then to the Internet. Source: MEF Multilocation Business Interconnection. Ethernet s ability to support multiple virtual connections over a single physical link makes it a good choice if you have multiple locations. If most of your traffic is to and from a headquarters location, you may want to set up Ethernet private lines from each branch office to headquarters, which would have a single physical connection supporting multiple virtual connections to each of the branch offices. If a considerable amount of your traffic is exchanged between individual branch offices (via VoIP, for example), your individual locations can be connected through a full mesh, with each location having a virtual connection to every other location. Defining the Value of Ethernet Services 9

10 Data Center Interconnection. If you operate your own data centers, you likely have multiple data centers backing each other up and automatically exchanging information so that redundant data is stored at each location. The trend toward big data, with enterprises retaining and analyzing huge amounts of customer information, means that the amount of data exchanged between data centers is growing larger. The data rates required between these data centers may exceed what can be supported by legacy communications technologies such as ATM or frame relay, making Ethernet an excellent solution. And while MPLS, like Ethernet, can support higher data rates, it typically is more expensive than Ethernet, particularly at those high data rates. Cloud Connectivity. Today, the Internet is the primary delivery mechanism for cloud services. As a result, you may have been reluctant to move mission-critical applications to the cloud, citing concerns over the lack of security, guaranteed performance and, in some cases, regulatory compliance. Ethernet, on the other hand, boasts characteristics that are aligned with the network requirements for cloud-based services, including high bandwidth, low-latency, security and scalability. Data-Storage Replication and Networking. As your company generates more data, it not only needs more storage, but the ability to replicate that data in an off-site data center to ensure it is available in the event of a disaster or outage. Ethernet s speed means the replication and backups are done in seconds or minutes, rather than hours. And if your employees are going to be using more data such as video during a scheduled backup, you can request more bandwidth to ensure the backup runs smoothly alongside regular work activities. Business Continuity/Disaster Recovery. Similar to data-storage replication and networking, the speed and consistency of Ethernet means it is well-suited to support business continuity and disaster recovery. You can use Ethernet as a secondary network so that in the case of an outage, failover takes milliseconds. Ethernet also can shift traffic to pre-established virtual paths to backup locations and data centers in the event that a disaster took the primary location or data center offline. Voice/Video/Imaging. Because it offers low latency, Ethernet also is specified for your latency-sensitive applications such as those involving voice or video. Some examples include medical imaging, distance learning and video conferencing. Ethernet boasts characteristics that are aligned with the network requirements for cloud-based services, including high bandwidth, low-latency, security and scalability. Defining the Value of Ethernet Services 10

11 What Are the Challenges With Ethernet Services? While the potential for Ethernet to help your business is clear, there are some obstacles to getting access to the services you want, including: Availability. Ethernet-over-fiber facilities generally are desired, but fiber is not available to all buildings. Installation can take days from when you sign the contract. (An on-net contract can be provisioned within 30 days typically.) As discussed, there are alternatives to fiber-based Ethernet, including copper and wireless, but they tend to be lower speeds. Speed. Not all pipes can handle GigE speeds yet, but more providers are deploying equipment that bulks up their networks with more bandwidth. Quoting & Provisioning Delays. A majority of quotes for Ethernet services are done manually. This takes time. And as mentioned above, a fiber build if required can extend provisioning up to days. Pricing Volatility. While Ethernet generally is less expensive than other options, expect little pricing uniformity among providers. Pricing for the various classes of Ethernet service remains extremely variable, with price differences from building to building in some cases, noted Insight Research in its September 2013 report. Defining the Value of Ethernet Services 11

12 What Should You Look for in an Ethernet Service Provider? Because your corporate network is really the backbone of your business, it s important to pick a provider that can provide you with the best performance and service levels to match your application requirements. Provider Types There are a range of sources for Ethernet services. Here are examples of Ethernet services providers in the U.S. Incumbent Local Exchange Carriers (ILECs), such as CenturyLink, Verizon and AT&T Competitive Local Exchange Carriers (CLECs), such as Windstream, XO and tw telecom Cable Multiple System Operations (MSOs), such as Comcast Business, Time Warner Cable Business Class and Charter Business Resellers or Aggregators, such as Bandwidth.com and NetWolves Specialty providers such as Wolfe, Zayo Group and US Signal In addition, there are agents and VARs that contract with many of these providers and can help you evaluate the best option for you. Market Leaders By provider type, incumbent carriers lead the U.S. Ethernet services market, with 47 percent of total Ethernet ports. They are followed by competitive providers with 33 percent of Ethernet ports and cablecos with 20 percent, according to a midyear 2013 Ethernet share report published in August 2013 by Vertical Systems Group. During this reporting period, the cable MSOs showed very strong market penetration. For the first time, the Cable MSO segment had more new Ethernet port installations than the Incumbent Carrier segment, said Rick Malone, principal at Vertical Systems Group. Competition was heaviest in the mid and small business sectors served by MSOs and regional CLECs, resulting in very favorable pricing for customers. The research firm s midyear U.S. Ethernet Leaderboard shows AT&T, Verizon, tw telecom, CenturyLink, Cox, XO, Time Warner Cable and Level 3 as market leaders. To qualify for the Leaderboard, a provider must have 4 percent or more of billable retail port installations. Companies in the challenger tier (1 percent or more of billable retail port installations) include Charter Business, Cogent, Comcast Business, Integra, Lightpath, Windstream and Zayo Group. Defining the Value of Ethernet Services 12

13 Other providers selling Ethernet services in the U.S. include Alpheus Communications, American Telesis, Bright House Networks, BT Global Services, Canby, Cbeyond, Cincinnati Bell, Consolidated Communications, Earthlink Business, Expedient, FairPoint Communications, FiberLight, Frontier, IP Networks, Lightower (includes Sidera Networks), LS Networks, Lumos Networks, Masergy, Megapath, NTT America, Orange Business, Reliance Globalcom, Sprint, SuddenLink, Tata, US Signal, Virtela and others. U.S. Business Ethernet Services Leaderboard Midyear AT&T Verizon tw telecom CenturyLink Cox XO Time Warner Cable Level 3 Source: Vertical Systems Group, August 2013 Selection Criteria In addition to the normal due diligence regarding financial stability and track record, consider the following attributes: Sales Engineering Support. Make sure that you have access to experienced sales engineers to assist you in evaluating your requirements and designing a cost-effective, high-performance network. Flexibility. Look for a provider that can deliver multiple network options and combine or customize them to meet particular requirements. Service Delivery. Look for a provider that can deliver on-net service quickly and, if needed, has a track record of completing new builds on time. Defining the Value of Ethernet Services 13

14 Service Level Agreements. Does the provider guarantee service performance, e.g., that they will be available percent of the time and that latency and packet loss will not exceed certain levels? SLAs are important if you have mission-critical traffic. Including SLAs for mean-time-to-repair may be particularly important as downtime can be costly. Customer Service. While it may seem obvious, the absence of effective customer care is keenly felt when there is a problem. Ensure that your provider has a track record for handling outages or other service-affecting issues promptly and with frequent communication. Pricing. Of course, you will want competitive pricing per port, but you also want to consider hidden costs. Does the provider charge for customer-located equipment, does it pass through build costs or kickbacks to property managers for building access? Similarly, are provisioning delays or poor service performance going to cost you in other ways, such as by delaying your ability to reach your productivity goals? Defining the Value of Ethernet Services 14

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