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Carrier Ethernet Services 2007 - 2012

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Ethernet, the protocol that is ubiquitous in enterprise local area networks, is now being offered by service providers as a metro or wide area service. These publicly available Ethernet services have been among the communications market’s fastest growing segments, with carriers enjoying revenue growth in the range of 30 percent annually as enterprises large and small opt for these new services that are being offered in an array of speeds and reach.

Carrier Ethernet offers the chance to tie customer locations together in what appear to be virtual LANs that can stretch across a metropolitan area, a region, the nation, or the world. Carrier Ethernet offers significant advantages in cost and simplicity and in facilitating convergence—and is often touted as a replacement for legacy data solutions like private line and frame relay. This Insight study projects market size, growth, and revenue, including segmented breakdowns of point-to-point and any-to-any services as well as by interface levels ranging from 10Mbit/s to the emerging 10Gigabit standard. This report provides insight into this emerging arena that will fundamentally shape the communications market of the future.


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    Report Excerpt

    1.1 Carrier Ethernet

    Ethernet is the world’s dominant machine-to-machine (computer-to-computer) interface protocol, with interfaces on more than 300 million computers worldwide—and it is fast becoming a potent force in metro and wide-area communications.

    Carrier Ethernet is still in an early growth stage. Second only to IP in terms of growth potential and influence on the communications market, Ethernet has become an increasingly prominent feature of the national data networking landscape in the US. As of late 2006, Ethernet services are available from virtually all major data service providers, including incumbents, second-tier carriers, and smaller specialized players differentiating themselves by price, technology, and flexibility.

    Until recently, Carrier Ethernet services have generally earned the label “metro Ethernet.” The large majority of Ethernet service has been, and still is, between points within a metropolitan area. It is only relatively recently that Carrier Ethernet has become a more widely accepted service available into the long-haul, though this has not been marketed in any significant way. This may change in 2007 as major incumbents—particularly AT&T and Verizon—plan to introduce long-haul Layer 2 virtual private networks (VPNs) in 2007.

    INSIGHT’s use of the term “Carrier Ethernet” refers to any Layer 2 public network service that extends Ethernet beyond the local area network (LAN) and connects to customers through Ethernet interfaces. Carrier Ethernet may be marketed as transparent or native LAN, Ethernet, Gigabit Ethernet, GigE, metro Ethernet, Ethernet private line (EPL), Ethernet virtual private line (EVPL), Layer 2 virtual private network (VPN), Ethernet access, virtual private LAN service (VPLS), or a variety of other names. INSIGHT’s definition does not, however, include routed Layer 3 IP-VPN services, which also carry IP over Ethernet. Carrier Ethernet services include relatively longstanding legacy transparent or native LAN services, whether asynchronous transfer mode (ATM)-based within the network core or using an Ethernet over fiber (or SONET) architecture. Our definition also includes newer services from small and large carriers that variously deliver end-to-end Ethernet directly over optic fiber, encapsulate Ethernet packets in SONET, or transmit it over dense wavelength division multiplexing (DWDM) wavelengths or as Ethernet over multi protocol label switching (MPLS).

    Ethernet can be segmented by its speed (<=10Mbit/s; >10Mbit/s-100Mbit/s; 100Mbit/s-1Gbit/s; >1Gbit/s), by the nature of its sale (retail vs. wholesale), by the region the service covers, and by topology, which refers to whether the service delivery can be characterized as E-line or E-LAN.

    E-line is an Ethernet service structurally similar to a private line. E-line point-to-point service provides a Layer 2 private line or virtual private line (VPL) on Ethernet between two locations.

    E-LAN service, by contrast, structurally resembles a LAN. It provides the potential for multipoint-to-multipoint Layer 2 service. Each user network interface (UNI) in an E-LAN service connects to a multipoint Ethernet virtual connection (EVC)...
     

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    Market Segmentation

     

    Total US Carrier Ethernet Access Revenues:
          by Topology:
               E-Line
               E-LAN
              Access
          by Regional Domain
              Metro
              Wide-Area
              Access
          by Type of Sale
               Retail, Wholesale
          by Bandwidth Level
               greater than 1Gbit/s (1000Mbit/s)
               greater than 100Mbit/s up to and including 1Gbit/s
               greater than 10Mbit/s up to and including 100Mbit/s
               up to 10Mbit/s

    US Carrier Ethernet Total Port Estimates by Throughput
          greater than 1Gbit/s (1000Mbit/s)
          greater than 100Mbit/s up to and including 1Gbit/s
          greater than 10Mbit/s up to and including 100Mbit/s
          up to 10Mbit/s

    Sample Monthly Pricing for:
          In-Metro E-Line and E-LAN Services
          Dedicated Internet Access

    Average Price Range for E-Line and E-LAN Services


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    Table of Contents

     

    Chapter I
    EXECUTIVE SUMMARY

    1.1 Carrier Ethernet
    1.2 If Ethernet Gains, Legacy Losses
    1.3 Forecast of Carrier Ethernet Services

    Chapter II
    BACKGROUND & INTRODUCTION

    2.1 The Emergence of the Carrier Ethernet
          2.1.1 Ethernet Spreads Out of the LAN
                2.1.1.1 Data over Voice
                2.1.1.2 Native LAN: Forgotten but Not Gone
                2.1.1.3  GigE without the Gig
          2.1.2 Carrier Ethernet Grows While General Market Declines
          2.1.3 Definitions
                2.1.3.1 Ethernet’s Components Defined
                2.1.3.2  Wholesale Forecast Definitions
          2.1.4 Five Key Attributes
                2.1.4.1  Service Standardization
                2.1.4.2  Scalability
                2.1.4.3  Service Management
                2.1.4.4  Reliability
                2.1.4.5  Quality of Service (QoS)
          2.1.5 Metro Ethernet Forum: Aid to Collaboration
          2.1.6 Ethernet Services: Conceptual/Technical Building Blocks
                2.1.6.1  User Network Interface (UNI)
                2.1.6.2 Ethernet Virtual Connection (EVC)
                2.1.6.3 Service Parameters
                2.1.6.4 Performance Quality Parameters
           2.1.7  Pricing
           2.1.8  Types of Service: E-line and E-LAN
                 2.1.8.1 E-line
                 2.1.8.2 E-LAN
                 2.1.8.3 Other Typologies: Dedicated vs. Switched
          2.1.9 Examples of Major Carrier Ethernet Applications
                2.1.9.1 LAN Extensions
                2.1.9.2 Layer 2 Virtual Private Network
                2.1.9.3 Dedicated Internet Access
    2.2 The Data Networking Context
          2.2.1 Packet Data Networking
                2.2.1.1 Internet Protocol (IP)
                2.2.1.2 Packet and Virtual Networks
          2.2.2 Ethernet and SONET
          2.2.3 Resilient Packet Ring (RPR)
    2.3 Ethernet’s Pros and Cons: The Case For and Against Carrier Ethernet
          2.3.1 Business Ethernet Drivers
                2.3.1.1  Video: The Next Killer Application
          2.3.2  Advantages of Carrier Ethernet
                2.3.2.1 Reduced Cost
                2.3.2.2 Ease of Use and Adoption
                2.3.2.3 Scalability
          2.3.3 Service Adoption Inhibitors
                2.3.3.1 Inertia and Investment Requirements
                2.3.3.2 Fiber Connectivity and Service Availability Constraints
                2.3.3.3  Interoperability as a Barrier
                2.3.3.4  Doubts Regarding Ethernet
    2.4 Changing Industry Structure
          2.4.1 Industry Consolidation: The Market Context
                2.4.1.1 Consolidation: The Enterprise Perspective
                2.4.1.2 Provider Strategies: Incumbent vs. Challenger
                2.4.1.3 The Regulatory Context: The FCC UNE-P Ruling and Small Players

    Chapter III
    TRENDS, APPLICATIONS & MARKETS

    3.1 Working Together: Interoperability, Merger, and Collaboration
          3.1.1 Interoperability: The Current Problematic State
          3.1.2 Interoperability: The Road Ahead
          3.1.3 The Road Ahead: Consolidation
          3.1.4 The Road Ahead: Collaboration
                3.1.4.1 Partnership Issues: Pros & Cons
          3.1.5 Service Interworking
          3.1.6 Challenger Diversification & Consolidation
    3.2 Widened Service Availability on Fiber and Copper
          3.2.1 The Emergence of Copper
          3.2.2 Ethernet as Future Network Foundation
    3.3 Service Pricing Stabilizes
          3.3.1 Ethernet`s Reason: Cost or Transformation?
          3.3.2 Data Price Stabilization: Case Study
          3.3.3 Costs beyond Service Pricing: The Real Deal
    3.4 Broadening of Applications and End Users
    3.5 Product Substitution: Ethernet Gains, Legacy Losses, Gradually
    3.6 The Competitive Outlook
          3.6.1 The Growth of Cross-Industry Players
    3.7 Ethernet`s Growing Readiness
          3.7.1 Quality of Service (QoS) Issues
    3.8 Retail Customer Perspective: Beyond Hype
    3.9 Switched, Any-to-Any Services Will Lead Ethernet Market
          3.9.1 VPLS: New Face of E-LAN Emerging
          3.9.2 Layer 3 vs. Layer 2 VPNs: New Clash of Civilizations?
    3.10 Carrier Ethernet Expanding Rapidly Into the Long Haul
    3.11 E-line Will Continue Strong, Steady Growth
    3.12 Wholesale Ethernet to Start Slower, Grow Faster
    3.13 Bandwidth Trends
          3.13.1 Bandwidth Rates Rising Inexorably
          3.13.2  More Low-End Customers Build Low-End Ethernet
    3.14 The International Outlook

    Chapter IV
    SERVICE PROVIDER PROFILES

    4.1 AT&T Corporation
          4.1.1 Network Architecture
          4.1.2 Services Offered
    4.2 BellSouth Corporation
          4.2.1 Network Architecture
          4.2.2 Services Offered
    4.3 Broadwing, Inc.
          4.3.1 Network Architecture
          4.3.2 Services Offered
    4.4 Cogent Communications
          4.4.1 Network Architecture
          4.4.2 Services Offered
    4.5 Global Crossing
          4.5.1 Network Architecture
          4.5.2 Services Offered
    4.6 Level 3 Communications, Inc.
          4.6.1 Network Architecture
          4.6.2 Services Offered
    4.7 Optimum Lightpath
          4.7.1 Network Architecture
          4.7.2 Services Offered
    4.8 Time Warner Telecom Inc.
          4.8.1 Network Architecture
          4.8.2 Services Offered
    4.9 Verizon Communications
          4.9.1 Network Architecture
          4.9.2 Services Offered
    4.10 Yipes Enterprise Services
          4.10.1 Services Offered

    Chapter V
    MARKET FORECASTS

    5.1 Methodology
    5.2 Definitions and Forecast Segmentation
          5.2.1 Definitions
          5.2.2  Segmentation
                5.2.2.1 Breakdown by Topology
                5.2.2.2 Breakdown by Regional Domain
                5.2.2.3 Wholesale vs. Retail
                5.2.2.4 Breakdown by Bandwidth Level
    5.3 Market Forecasts
          5.3.1 Total Market
          5.3.2 Market by Topology
          5.3.3 Market by Regional Domain
          5.3.4 Retail vs. Wholesale
          5.3.5 Bandwidth Levels

    Appendix
    GLOSSARY

    Table of Figures

    Chapter I

    I-1 Total US Carrier Ethernet Revenues

    Chapter II
    II-1 User Network Interface (UNI)
    II-2 Frame Loss
    II-3 E-Line Point-to-Point Service Type
    II-4 E-LAN Multipoint-to-Multipoint Service Type
    II-5 LAN Extension Using E-LAN Services
    II-6 Illustration of VLAN Tag Support
    II-7 Dedicated Internet Access
    II-8 Typical IP Network
    II-9 Managed Packet Network, Virtual Private Line
    II-10 Resilient Packet Ring (RPR) Technology
    II-11 Data vs. Video Traffic, 2005-2010 (Tbit/s)
    II-12 Three-Year Total Cost Savings for Ethernet Private Line

    Chapter III
    III-1 AT&T Data Transport Revenue Growth

    Chapter IV

    IV-1 Broadwing All-Optical Switched Network
    IV-2 Level 3’s National Backbone (3)Link Intercity Wavelength Net

    Chapter V
    V-1 Total US Carrier Ethernet Revenues
    V-2 US Carrier Ethernet Access Revenues
    V-3 US Carrier Ethernet E-Line Revenues
    V-4 US Carrier Ethernet E-LAN Revenues
    V-5 US Carrier Ethernet Revenues by App/Topology
    V-6 Percentage Ethernet Revenues by Topology
    V-7 US Carrier Metro Ethernet Revenues
    V-8 US Carrier Wide-Area/Long-Haul Ethernet Revenues
    V-9 US Carrier Ethernet Revenues by Geography/Region
    V-10 Percentage Ethernet Revenues by Region
    V-11 US Carrier Ethernet Topology by Regional Market
    V-12 US Retail Carrier Ethernet Revenues
    V-13 US Wholesale Carrier Ethernet Revenues
    V-14 US Carrier Ethernet Revenues by Retail/Wholesale
    V-15 Percentage Ethernet Revenues by Retail/Wholesale
    V-16 US Carrier Ethernet Revenues >1Gbit/s
    V-17 US Carrier Ethernet Revenues >100Mbit/s – 1Gbit/s
    V-18 US Carrier Ethernet Revenues >10Mbit/s – 100Mbit/s
    V-19 US Carrier Ethernet Revenues <=10Mbit/s
    V-20 US Carrier Ethernet Revenues by Bandwidth Level
    V-21 Percentage Revenues by Throughput Level
    V-22 US Carrier Ethernet Total Port Estimates by Throughput

    Table of Tables

    Chapter I

    I-1 Characteristics of Ethernet Service Varieties

    Chapter II
    II-1 Characteristics of Ethernet Service Varieties
    II-2 Sample Monthly Pricing for In-Metro E-Line and E-LAN Svcs
    II-3 Sample Monthly Pricing for Dedicated Internet Access
    II-4 SONET and Ethernet Defined Transmission Rates
    II-5 Average Price Range for E-Line and E-LAN Services
    II-6 Major Ethernet Providers Deploying/Planning Eth over Copper
    II-7 Sample QoS-Based Metro Ethernet SLA, EVPL
    II-8 Continuing Industry Consolidation

    Chapter III

    III-1 Comparative Strengths of Layer 2 and Layer 3 VPNs

    Chapter V
    V-1 Total US Carrier Ethernet Revenues
    V-2 US Carrier Ethernet Access Revenues
    V-3 US Carrier Ethernet E-Line Revenues
    V-4 US Carrier Ethernet E-LAN Revenues
    V-5 US Carrier Ethernet Revenues by Appl/Topology
    V-6 Percentage Ethernet Revenues by Topology
    V-7 US Carrier Metro Ethernet Revenues
    V-8 US Carrier Wide-Area/Long-Haul Ethernet Revenues
    V-9 US Carrier Ethernet Revenues by Geography/Region
    V-10 Percentage Ethernet Revenues by Region
    V-11 US Carrier Ethernet Topology by Regional Market
    V-12 US Retail Carrier Ethernet Revenues
    V-13 US Wholesale Carrier Ethernet Revenues
    V-14 US Carrier Ethernet Revenues by Retail/Wholesale
    V-15 Percentage Ethernet Revenues by Retail/Wholesale
    V-16 US Carrier Ethernet Revenues >1Gbit/s
    V-17 US Carrier Ethernet Revenues >100Mbit/s – 1Gbit/s
    V-18 US Carrier Ethernet Revenues >10Mbit/s – 100Mbit/s
    V-19 US Carrier Ethernet Revenues <=10Mbit/s
    V-20 US Carrier Ethernet Revenues by Bandwidth Level
    V-21 Percentage Revenues by Throughput Level
    V-22 US Carrier Ethernet Total Port Estimates by Throughput


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