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Increasing customer demands for metro Ethernet will cause service provider to increase metro capital expenditures as they begin to shift from legacy TDM to products based on IP
and Ethernet, according to a Infonetics Research study "Service Provider
Plans for Metro Optical and Ethernet."
According to the San Jose, Calif.-based research firm, service providers plan to offer more Ethernet services, plus other services over Ethernet, but their spending plans
could speed up if manufacturers solve a number of tricky technical challenges.
For example, nearly two-thirds of the service providers plan to roll out
QoS-based services over Ethernet by next January, including packetized voice,
bandwidth on demand, and private lines, but manufacturers must address the
problem of providing QoS for Ethernet services.
The study described this as "a particularly nasty problem," because providers use different
technologies to reach their various target customers: wholesale (provider to
provider), large business, medium business, small business, SOHO, and
residential.
Specific topics covered in the study include Metro Ethernet architecture, services, and applications; technologies planned for various target customer groups; drivers and barriers for optical metro and Ethernet services; service cannibalization issues; metro optical and Ethernet manufacturers used now and being evaluated; manufacturer selection criteria, QoS and SLAs; expenditures, revenue, and new service plans; operating expense reduction strategies; network management challenges and strategies
"All carriers are offering Ethernet or will soon, because corporations are
demanding it," said Michael Howard, principal analyst of Infonetics Research
and lead author of the report. "Ethernet offers higher bandwidth at a lower
price per bit, and is simpler. Carriers offer Ethernet services over a variety
of technologies, including MPLS, SONET/SDH, RPR, and WDM, raising the
complexity and creating some tough technical issues for manufacturers to
address. As soon as they do, they'll find service providers ready to invest."
Infonetics said its study is based on formal interviews with 27 infrastructure-owning
service providers in North America, Europe, and Asia Pacific, as well as
informal discussions with service providers. Of the
providers interviewed, 56 percent are incumbents and IXCs; the rest are competitive
operators and IOCs.
The survey offered the following findings:
63 percent of respondents will use an RPR network after January 2005 (more
than doubling from 2003)
Ethernet switches and routers are the main technology for delivering
Internet access, SONET/SDH is preferred for virtual private line
services, WDM is preferred for SAN extension
The leading revenue source among metro Ethernet services in 2002 was
wholesale, but in 2004, retail point-to-point leads with 44 percent of such
revenue
SONET/SDH services provide the bulk of metro optical service revenue
from 2002 to 2004, as they have for many years
European respondents are much more concerned with competing with their
own legacy services: 57 percent rate it highly as a challenge, vs 17 percent of North
American respondents
Incumbents are very concerned with operational expenditures (64 percent rate
it highly as a business challenge), while only 6 percent of the other types of
service providers rate it highly
Asia remains a metro Ethernet and optical network hotspot
Earlier this month, Infonetics reported that the metro Ethernet market reached $2.9 billion in 2003 and will reach $7.5 billion by 2007.
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