Ethernet: A compelling alternative to legacy last-mile solutions

As businesses increase their demands for additional services and bandwidth, the shortcomings of existing last-mile access solutions have become even more apparent. The total access bandwidth purchased by U.S. business locations grew 45% from mid-2000 to mid-2001, according to an RHK study conducted in March 2002. Another RHK study (July 2001) estimated that the vast majority of business sites require bandwidth between 8 Mb/s and 10 Mb/s. Yet most business users have no viable economic choice but to limp along with low-speed T-1 or ADSL services, or take a very large step and pay for a T-3 or a fractional T-3 service. A large gap exists between customer demand for services and an economical and timely means to supply those services.

Voice-optimized solutions not optimal

The need to provide data applications is constantly increasing. Although a great deal of work was done to optimize legacy voice equipment for these data applications, the effort has not paid off as a long-term solution. Existing platforms cannot economically scale to meet the current bandwidth and service requirements of business customers. Given the cost, complexity and time requirements of scaling voice-optimized networking equipment to deploy data applications, carriers are often looking elsewhere for high-bandwidth, high-service access solutions.

Ethernet: A compelling alternative

Ethernet is a compelling alternative to legacy last-mile options for several reasons: 

• More than 90% of all data traffic originates or terminates as Ethernet traffic. There are currently more than 350 million Ethernet LAN nodes in service

• Access speeds range from 1 Mb/s up to 1000 Mb/s, and bandwidth is easily scalable on an "as needed" basis in 1 Mb/s increments

• Many carriers are deploying Fast Ethernet and Gigabit Ethernet across fiber-optic metro networks

• Business customers are pushing for Ethernet services as a more cost-efficient and effective alternative to existing networking options

• Ethernet can be media independent, enabling carriers to reach all customers with the same type of service.

To meet the increased business demand for more bandwidth, most carriers offer last-mile Ethernet over high-capacity fiber connections. However, less than 10% of all business buildings in the United States are served directly by fiber. Although fiber clearly represents the future in access technology, this figure is unlikely to change soon. Installing fiber infrastructure can cost tens of thousands of dollars per building, and the connectivity process can take months. In addition, many cities have enacted regulations that make it difficult or impossible to deploy fiber in a timely fashion. These issues limit the applicability of an Ethernet over fiber-only strategy.

And what about...

What about the lack of purpose-built Ethernet access platforms for the last mile? Many carriers have deployed Ethernet access services utilizing switching platforms that were originally designed to deliver services within a corporate LAN. Designed for enterprise LAN applications, these systems simply do not scale to handle the demands and complexity of last-mile access. Designed and built without centralized, carrier-class operation, administration, maintenance and provisioning (OAM&P) functionality, these systems often require expensive truck rolls whenever a business customer has connectivity problems or requests changes to service--at the cost of several hundred dollars per trip.

These obstacles have limited the scale and profitability of business Ethernet access, resulting in a connectivity chasm between corporate LANs and carrier metro networks. 

The missing link to mass-market services

The ideal Ethernet access solution would allow carriers to deliver high-value business bandwidth and services over the existing last-mile copper infrastructure, while simultaneously supporting better, more efficient Ethernet service to businesses that have a direct fiber connection. Unfortunately, most emerging Ethernet-over-copper technologies do not reliably support the speeds and distances required to cover the carrier serving area (CSA) for business-grade Ethernet services. To amortize the cost of rolling out business-class services, carriers would like to offer the full Ethernet symmetrical bandwidth of 10 Mb/s over copper throughout the CSA--without creating spectral compatibility issues that can interrupt existing voice and data services. The ideal platform should also support multiple services on a single physical link, and allow carriers to provision, manage and upgrade business customers without truck rolls. Multiple services can be layered over the same physical connection (see Figure 1).

Today, purpose-built last-mile access solutions are appearing that deliver broadband Ethernet (as well as legacy services) across both existing copper and fiber infrastructure. These solutions alone can increase the carriers' Ethernet market opportunity by tenfold, to include the greater than 90% of business buildings that are served only by copper. These new solutions offer advantages every step of the way, from savings in capital expenses, to faster time-to-service, to the ability to uniformly sell lucrative new services to more customers, to significant reductions in operating expenses.

Capping capex, speeding time-to-service

Purpose-built Ethernet access solutions incorporate several features that contribute to lower capital expenses. For example, several features enable carriers to deliver multiple services such as point-to-point Ethernet private lines, multipoint-to-multipoint extended LAN services, integrated TDM services, and high-speed Internet access--all across a single physical connection. This standards-based, integrated, and multiservice capability eliminates the need to add new circuits for each new service, as well as the need to purchase multiple boxes to implement each additional service. This one integral feature eliminates capital expenses and reduces both time-to-market and operational expenses. 

In addition, some purpose-built solutions offer the same plug-and-play capabilities as Ethernet LAN platforms. The carrier gathers information about the customer demarcation device (such as serial numbers) and maps users to logical services and their respective logical connections. When the equipment is installed at the customer premises, the end users' connections are created automatically, based upon the previously established provisioning rules.

This plug-and-play capability promises an order-of-magnitude improvement in the amount of time it takes to provision services to a new customer. The improvement in the time to add additional services--when a customer decides to add more bandwidth or a new service-is especially dramatic. Provisioning new services requires only a simple point-and-click; there are no truck rolls to install new equipment or manually provision new services, and no new lines to be connected. On earlier-generation Ethernet platforms, it could take up to two months to provision new services; with the current generation of purpose-built Ethernet platforms, it takes only minutes to provision the latest carrier services from a central location.

New revenues from new services...

Carriers are constantly challenged to come up with new revenue streams, either by:

1. Selling new services to existing customers

2. Offering low-priced services that lure new customers away from competitors. 

Ethernet access services work well with the first sales example above because they enable carriers to sell their existing customers something they would love to have--an Ethernet connection. And Ethernet access turns the second model on its head. Competing on price for basic services ultimately reduces profit margins for all carriers. With Ethernet-based access services, carriers can gain new customers and improve their profit margins by offering more bandwidth and more services at higher prices. For example, a business customer might pay $400 a month for a T-1 line with symmetrical 1.5 Mb/s connectivity. A competing carrier offering Ethernet access could sell that same customer a more powerful 5 Mb/s symmetrical Ethernet Internet access service for only $750 a month--and later sell additional services such as private lines over the same connection without adding any additional equipment.

...Without losing existing revenues

A fundamental challenge facing carriers today is how to provide the Ethernet services customers want without cutting into their high-margin private line revenues, which are expected to reach $14 billion by 2004, according to Vertical Systems Group. The multiservice capability of purpose-built Ethernet access platforms lets carriers preserve the profitability of T-1 services by enabling gradual migration of customers to high-speed Ethernet services. 

The feeds and speeds alone cannot tell the story

Carrier-class reliability is essential to bringing new Ethernet services to the maximum number of potential customers with minimal disruption to existing services. Only carrier-class equipment can meet the stringent temperature power, space and interface requirement to work in any outside plant facility--side by side with current voice and data services. Solutions designed to operate in central offices as well as in controlled environmental vaults, remote terminals and on poles allow carriers to deliver Ethernet to all business buildings at traditional CSA distances of 12,000 feet and beyond.  

Carriers require high levels of reliability, availability and serviceability because of the scope and complexity of their operations and the types of services they offer. Carrier-class Ethernet access platforms satisfy all of these requirements, and also enable lower cost of service and rapid service creation. In addition, compliance with OSMINE, which ensures interoperability across telco equipment and operations support systems, allows carriers to scale their operations to serve mass markets.

Opex down, profitability up

For carriers taking the long-term view, reduced capital expenses and improved revenue streams are necessary benefits, but are often not sufficient for justifying the cost of deploying Ethernet-based access services. Ongoing operational expenses are also important to the bottom line. One critical mechanism for reducing operational expenses is seamless integration of the Ethernet access platform with established network OAM&P. Lack of such integration adds significantly to carrier operating expenses, affecting service margins and ultimately end-user costs.

Take, for example, the case of a company that starts with an Ethernet Internet access service for a single site. Six months later the company decides it wants to add a transparent LAN service between its first site and a new second site. Previously, the carrier would have had to roll out new hardware to both sites and provision it manually, a process that delays service activation, limits the rate of deployment, and increases costs. With an Ethernet access platform, only one truck roll is required to install CPE at the new location. The carrier can re-provision existing equipment at the first site from a network operations center (NOC). The Ethernet-based access equipment can carry multiple services and logical connections over a single physical connection.

In a similar scenario, two businesses connected by a previously deployed private-line Ethernet service decide they also want to access the Internet via Ethernet. The carrier can add Internet access from its NOC electronically, with a simple software configuration change. Changing bandwidth is equally easy because today's solutions are flexible enough to cost-effectively provision scalable bandwidth-on-demand when and where it is needed in enterprise-friendly 1 Mb/s increments.

Add everything up and today's Ethernet access solutions can help dramatically reduce the overall per-subscriber operational cost of delivery services. With carriers spending up to 40% of their opex on the access network, any improvement can have a profound impact on the bottom line.

An economic breakthrough

Purpose-built Ethernet access platforms represent a fundamental breakthrough in the economics of last-mile networking. Customers will benefit from this breakthrough as high-speed Ethernet access services become available throughout carriers' serving areas. And carriers will benefit from a solution that enables them to offer important new revenue-generating services while at the same time reducing the high capital and operating expenditures typically associated with the introduction of new services. In addition, carriers will be able to offer these new services independently of the particular type of media (fiber or copper) that connects the services to the carrier's network. The end result is a win-win: better service for customers and an improved return on investment for carriers.

Kevin Sheehan is Vice President of Marketing for Hatteras Networks.

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