Executive Summary Data networks are an increasingly critical component of international enterprises and customers are moving towards next generation services that better suit their evolving application requirements. As a result, international service providers are updating and expanding their MPLS core and DWDM networks, focusing on delivering resilient, costeffective, and scalable solutions through optimized network architectures, promoting MPLS IP VPN and Ethernet services or hybrids thereof. Expansion is guided by customer requirements, investing in new PoPs and deploying equipment to follow their customers into new geographies. Service providers are delivering a mix of customized solutions, from pointto-point to any-to-any connectivity, from low speed internet to high speed access to cloud and data center services, that enterprises need to compete. TeleGeography s Global Enterprise Networks details the international enterprise network service offerings and network coverage of 134 leading service providers. The analysis examines trends in geographic coverage and expansion, service features, and pricing. Service offerings covered include MPLS IP VPN, Ethernet, and dedicated Internet access (DIA). Geographic Coverage TeleGeography s assessment of geographic coverage is based on the number of carriers surveyed that offer on-net service in a given city, country, or region. On-net service is defined as those cities in which the carrier owns and operates their own point-of-presence (PoP) and is responsible for the equipment. This year, TeleGeography asked survey participants to complete a matrix that matched nine enterprise network services with geographic availability at any on-net location globally. In years past, the survey matrix had been limited to 166 major business centers. To maintain a time series, year-on-year growth is calculated on the basis of how many of the 134 carriers surveyed in both 2013 and 2014 offer a given service in the original 166 cities covered. Services included in TeleGeography s profiles are any-to-any network services (MPLS IP VPN, DIA, and EVPN), Ethernet private line services (EoMPLS, EoSDH/SONET, and EoDWDM), and long-haul private line (T/E Carrier, SDH/SONET, DWDM). 1
Global Product Comparison MPLS-based IP VPN port service remained the most ubiquitous enterprise wide area network (WAN) product across the key 166 business center cities. Across all carriers and cities there were 2,158 instances of VPN service. Point-to-point EoMPLS was the second most frequently-offered product globally, with 1,567 instances. Layer 2 VPN or Ethernet VPN (EVPN) was close behind with 1,497, followed by dedicated Internet access (DIA) in fourth (see Figure: Number of Instances of Nine Enterprise Products across 166 Key Global Business Centers, 2014). Of these four key enterprise products, all were most widely available in the U.S. & Canada, followed by Europe, Asia and Pacific and then Africa and Latin America. FIGURE 1 Number of Instances of Nine Enterprise Products across 166 Key Global Business Centers, 2014 Notes: Each bar represents the total number of instances that participating carriers indicated they could offer each of the listed nine services for the 166 key business center cities. Although IP VPN has been the most ubiquitous product for several years, carriers did not invest in its expansion in 2014. Over the past several years they have been investing in other products, such as EVPN, which have been catching up in terms of global frequency of availability. EVPN, now a more well established product, was not the fastest growing in 2014. EoDWDM service grew the most among carriers that participated in both 2013 and 2014, with 26 percent year-on-year growth (see Figure: Global Annual Product Growth for 166 Key Global Business Centers, 2013-2014). Much of the growth for EoDWDM came from the Asia and Pacific region, where the product grew 77 percent between 2013 and 2014. Despite this, EoDWDM was still the least prominent product (see, again, Figure: Number of Instances of Nine Enterprise Products across 166 Key Global Business Centers, 2014). 2
This large growth is thus at least partially attributable to the low absolute numbers of the product. DWDM was the next fastest in growth at 20 percent, but was also at the bottom of the products in terms of total instances. FIGURE 2 Global Annual Product Growth for 166 Key Global Business Centers, 2013-2014 Notes: Each bar represents the annual growth between 2013 and 2014 of the number of instances of carriers reporting service for the listed product across the 166 global business centers. This growth only includes the 113 carriers for which there were 2013 and 2014 profiles. Not all higher growth products were the result simply of low absolute number of instances. EoMPLS and EVPN were third and fourth in annual growth, respectively, despite being second and third for absolute number of instances. Ethernet is clearly still the main focus area for carriers expansion of WAN services. Legacy services such as SDH/SONET, VPN, and DIA exhibited the lowest growth rates and reflect carriers focus on Ethernet expansion (see, again, Figure: Global Annual Product Growth for 166 Key Global Business Centers, 2013-2014). Global Provider Comparison It is important for enterprise customers to not only understand how the geography of a corporate network may affect the available services, but also the landscape of providers that can provision certain segments of their network. Orange Business Services remained the most ubiquitous IP VPN provider across the 166 business centers, covering 162. The top ten is rounded out by a roster of well known providers: BT, Verizon, AT&T, Level 3, Tata, T- Systems, SingTel, NTT, and Sprint (see Figure: Top 10 International Service Providers by Number of VPN Cities Within 166 Key Global Business Centers). For Ethernet services, the 3
top ten carriers differed, highlighting the emphasis certain carriers place on Ethernet services over layer 3 IP VPN. FIGURE 3 Top 10 International Service Providers by Number of VPN Cities Within 166 Key Global Business Centers Notes: Each bar represents the number of cities among the key 166 business center cities in which the listed carrier can offer IP VPN. WAN Services Review MPLS Network IP VPN MPLS Network IP VPN service is nearly universally offered, with 133 of 134 profiled carriers in 2014 offering the service. A key selling point of MPLS IP VPN is a customer s ability to manage and prioritize traffic streams to match the needs of specific applications. Traffic prioritization with Class of Service accommodates differentiated traffic streams by allowing packets from low latency applications such as voice and video to jump the queue ahead of other traffic. The most common number of service classes is four, typically labeled as Bronze, Silver, Gold and Platinum. Availability of IP VPN services via Ethernet ports continues to become more common as carriers seek to migrate customers from legacy services. In 2014, 80 percent of carriers indicated that they offer T-1/E-1 interfaces, 86 percent offer 10 Mbps Ethernet, 93 percent offer 100 Mbps FastE, and 77 percent offer GigE. Just 63 percent of carriers offer 10 GigE ports. The relatively limited availability of 10 GigE ports is not entirely surprising, given 4
that most port sales remain at the 10 Mbps level or lower (see Figure: IP VPN Port Speed Availability). FIGURE 4 IP VPN Port Speed Availability Ethernet While aggregate Ethernet service availability is growing steadily, the availability of Ethernet point-to-point, point-to-multipoint, and multipoint-to-multipoint services varies widely. All 128 carriers profiled that offer Ethernet services offer point-to-point Ethernet service, while 74 percent offer point-to-multipoint and 72 percent offer multipoint-to-multipoint Ethernet service. The most common implementations of these services are Ethernet over MPLS, Ethernet VPN (EVPN), Ethernet over SDH/SONET, and Ethernet over DWDM (see Figure: Ethernet Protocol Availability). Each carrier service profile identifies which services a carrier offers, and the underlying network used to deliver it. 5
FIGURE 5 Ethernet Protocol Availability Notes: Data reflect 84 Ethernet service providers surveyed by TeleGeography. Class of Service implementation is less widely available for Ethernet services than it is for IP VPN. Among the Ethernet carriers surveyed, 51 percent offer CoS differentiation for point-to-point Ethernet services, and 66 percent of carriers that provide Ethernet multipointto-multipoint services offer CoS differentiation. As with MPLS IP VPN services, the most widely used convention is to offer four classes of service. The MEF s Carrier Ethernet certifications provide useful metrics to gauge the interoperability of carrier networks against a set of standardized criteria. These criteria are meant to ensure end-user experience across multiple service provider platforms. MEF 9, MEF 14, and the Carrier Ethernet 2.0 standard provide network evaluation that help facilitate a common service level across carrier networks. While MEF certification is not yet universal, of the 128 carriers with Ethernet profiles in 2014, 51 indicated that they were MEF certified. Advocates expect that compliance with these enhanced standards will be one of the key metrics on which enterprise customers evaluate and pre-qualify their service providers in the future. Network Monitoring and Service Carriers seek to differentiate themselves, not just in terms of price, but also with respect to their service features. For many enterprises, information about and control over their network are key service features. Customer service portals, which provide enterprise customers with information regarding their network performance are widely available, with 71 percent of profiled carriers offering them in 2014. Popular portal features include product performance monitoring, billing information, ability to track individual usage, and alerts for threshold hits. 6
For those customers looking for even greater control over their networks, a number of carriers are introducing bandwidth on demand services, which allow customers to burst above their contracted port capacity to meet sudden or planned increases in traffic across their network. Customers are charged for only the capacity that they use, instead of paying for an over-provisioned higher bandwidth port over the longer term. In 2014, 12 percent of profiled carriers offered some form of bandwidth on demand services and 10 percent offered a usage based billing system to account for this. Software Defined Networking (SDN) and Network Function Virtualization (NFV) are two of the most highly touted technologies in the enterprise market for providing this flexibility and cost-effective network solutions. The services work in combination to provide both carriers and enterprises with networks can be altered in real time as opposed to weeks or months and can better serve customer application requirements. Enterprise Services Pricing Global Enterprise Networks analyzes pricing trends for three enterprise network services: MPLS-based IP VPN, DIA, and Ethernet. The analysis of IP VPN and DIA pricing draws on data from TeleGeography s Enterprise Network Pricing Service, while the Ethernet pricing analysis utilizes data from our Ethernet Pricing Service. IP VPN Prices for MPLS IP VPN, the most ubiquitous enterprise service globally, continue to decline. Between 2011 and 2014, best efforts 10 Mbps IP VPN port prices across major global hubs eroded an average of 22 percent annually. The rate of decline ranged from 18 in New York to 27 percent in Singapore, indicating expanding availability and increasing supply of the service around the world (see Figure: Median Best Efforts 10 Mbps IP VPN Port Prices in Key Global Cities, Q3 2011-Q3 2014). 7
FIGURE 6 Median Best Efforts 10 Mbps Median IP VPN Port Prices in Key Global Cities, Q3 2011-Q3 2014 Notes: Each column represents the median monthly lease price for the listed city. Prices are in USD and exclude local access and installation fees. While port prices as a whole declined globally, the absolute port price differs significantly by geography. In Q3 2014, New York and London best efforts 10 Mbps ports were priced at $537 and $562, respectively. In comparison, in São Paulo a 10 Mbps best efforts port was $1,722, more than three times the price of the same capacity in New York. Similarly, median 10 Mbps ports in Sydney cost $1,397 in Q3 2014, over twice the price in London. The price of global IP VPN ports corresponds with the price of the underlying international bandwidth to a city. Accordingly, IP VPN service is significantly more expensive in Latin America, Africa, and Oceania, where the level of competition is lower and international connectivity is more expensive for carriers. Ethernet Point-to-Point Ethernet services are becoming a compelling option for enterprise buyers due to its scalability and cost-effectiveness compared to legacy services. In particular, point-to-point EoMPLS services are the most popular and widely available service options. Prices for EoMPLS 100 Mbps pseudowires on key international routes decreased an average of 23 percent annually since H2 2011. The rate of price erosion ranged from 13 percent on Miami- São Paulo to 28 percent on the competitive London-New York and Hong Kong-Tokyo routes. As with other enterprise services, Ethernet is least expensive on routes connecting developed markets. In H2 2014, FastE EoMPLS pseudowire prices between Frankfurt and London were 8
among the cheapest price points at $697 per month (see Figure: Median FastE EoMPLS Prices on Major International Routes, H2 2014). Other competitive routes such as Los Angeles-New York and London-New York were $1,126 and $1,410 per month. Routes with a more limited number of providers offering Ethernet services were much more expensive. Median FastE EoMPLS prices on Miami-São Paulo were $5,369 per month, almost five times the price in the U.S. In Q3 2014, a connection between Hong Kong and London was $5,883 per month, four times the price of London-New York. FIGURE 7 Median FastE EoMPLS Prices on Major International Routes, H2 2014 Notes: Each column represents the median monthly lease price for an EoMPLS FastE circuit on the listed route. The line represents the percentage decline of the median prices calculated as a three year compound annual growth rate. Prices are in USD and exclude local access and installation fees. FastE = 100 Mbps. Ethernet VPN Price Trends EVPN services are compelling at network sites such as headquarters and data centers that maintain higher capacity requirements and for customers who looking for greater control over their network management. As such, the service is often implemented at specific sites in a global WAN, often in combination with layer 3 IP VPN services. EVPN price reductions reflect the growing availability of the service globally, but the rate of price erosion varies significantly by market. Between 2011 and 2014, best efforts FastE EVPN prices decreased an average of 13 percent, with the pace of decline ranging from 4 percent in São Paulo to 22 percent in Mumbai (see Figure: Median Best Efforts FastE EVPN Port Prices in Select International Cities, H2 2014). High median FastE prices such as those in Mumbai at $12,210 and São Paulo at $9,743 per month, stand in stark contrast to those in Hong Kong and New York, which were $3,787 and $2,259 per month in Q3 2014. As EVPN 9
services become more widely available in these markets price declines will continue to be brisk. FIGURE 8 Median Best Efforts FastE EVPN Port Prices in Select International Cities, H2 2014 Notes: Each column represents the median monthly lease price in the listed city. The line represents the percentage decline of the median price calculated as a three year compound annual growth rate. Prices are in USD and exclude local access and installation fees. FastE = 100 Mbps. Dedicated Internet Access Prices for DIA continued to decline globally (see Figure: Median Monthly FastE DIA Prices in Global Cities, 2011-2014). The most dramatic price reductions were in Mumbai, where median monthly FastE prices dropped 31 percent annually since 2011 to $118 per Mbps in Q3 2014. In comparison, median prices in Los Angeles, decreased just 13 percent annually over the past three years, to $12 per Mbps. 10
FIGURE 9 Median Monthly FastE DIA Prices in Global Cities, 2011-2014 Notes: Each line represents the median monthly recurring charge in the listed city, excluding local access and installation fees. All prices are in USD. FastE = 100 Mbps Outlook As the enterprise market evolves, customer solutions will increasingly shift towards hybrid networks, integrating a mix of layer 3 IP VPN, Ethernet, and DIA services to connect sites that may have dramatically different capacity requirements. End-user capacity needs at will continue to grow and network optimization will be driven by service availability, Class of Service requirements, and price. Integration of cloud services and distributed data centers into the corporate network will be a major driver for connectivity demand. Enterprise service providers will continue to expand their on-net footprints, particularly for Ethernet services such as EoMPLS and EVPN. Many of the carriers profiled are working towards a goal of a single unified service platform where all customer requirements are delivered over a single network, creating economies of scale and enabling more efficient management. Global and pan-regional carriers, who are more likely to have customers with sites in both developed and developing markets, will continue to see strong demand for IP VPN. Service providers focused more exclusively on developed markets (e.g. Western Europe) will focus on scalable high capacity Ethernet services, looking to deploy fiber based solutions wherever possible. Ethernet will continue to dominate incremental sales of point-to-point service. While SDH/SONET services will persist in some environments, particularly submarine cable systems, they will continue to be phased out across terrestrial systems and metro markets. EoMPLS will serve the largest segment of the market, replace legacy services and allow for CoS differentiation. Demand for EoDWDM, particularly GigE, will continue to grow as more 11
carriers upgrade their networks with next generation equipment. As it is most closely tied to wavelength prices, EoDWDM will be the most cost effective way of delivering point-to-point services at high capacity increments. More end-users will evaluate selection of DIA as their primary network technology. The low cost, high capacity alternative may be the solution of choice for customers that do not have CoS or major security requirements and want to avoid the higher cost of MPLS IP VPNs. When multiple sites in a region can be connected with a single service provider, keeping all traffic on-net to that provider, end-users can successfully deploy tunneled solutions and still be able to identify and isolate network failures quickly. The outlook for emerging markets is largely unchanged since early 2013. Developing countries, particularly those in Africa and Latin America, will see greater availability of Ethernet services and more choice of providers for layer 3 IP VPN. As transport costs on submarine cable systems to these developing markets fall, it will become more attractive for carriers to establish their own MPLS PoPs and offer VPN and Ethernet services directly, rather than backhaul requirements through a partner back to their network. The main development in these regions will be the expansion of local Ethernet services. In an ideal world, a single technology platform will be able to serve all customer sites. Regional and national carriers will continue to invest in their local networks to connect more sites with Ethernet. No enterprise service provider has universal coverage and the need for NNI agreements between carriers to serve customer needs out of region will persist. Standardizing network interconnects and improved mapping of CoS for layer 3 and layer 2 service between carriers will be critical to ensuring service continuity to the end user. Many carriers will seek certification by the Metro Ethernet Forum for Carrier Ethernet 2.0, and although not technically a requirement, it will be a pre-qualifier that potential customers will use in selecting a service provider. Continued innovation drives cost reduction for transport, the foundation for MPLS meshed networks and EoDWDM point-to-pont services. Price points for 100G wavelengths on terrestrial routes have already declined to 6 to 8 times the monthly lease rate for a 10 Gbps wavelength, down from 8 to 10 times a year ago. Service providers expectations the multiple will narrow to between five to six in less than five years. Carriers will continue to invest in their networks to compete for the lowest cost base, and competition will continue to yield double digit price erosion. Managed service pricing, which has declined in the 10 to 20 percent per year range over the last three years, will continue to do so. Ethernet services, particularly EoDWDM, may fall faster initially as prices are more closely tied to DWDM transmission costs where the greatest reductions continue to occur. 12
The content on the preceding pages is a section from TeleGeography's Global Enterprise Networks The work is based on sources believed to be reliable, but the publisher does not warrant the accuracy or completeness of any information for any purpose and is not responsible for any errors or omissions. This work is for the confidential use of subscribers. Neither the whole nor any part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded or otherwise, without prior written consent from PriMetrica, Inc. All rights reserved. TeleGeography A Division of PriMetrica, Inc. Washington, D.C. / San Diego / Exeter U.S. tel: +1 202 741 0020 / U.K. tel: +44 1392 315567. www.telegeography.com 13