ETHERNET FOR 'THE OTHERS'

The ceiling on the metro Ethernet market is made of glass. Only about 10% of businesses have access to fiber, and the other 90% aren't thrilled with the idea of paying to dig up their driveways to lay the stuff. To bring the low cost-per-bit of Ethernet access to that other 90%, startup vendor Ceterus Networks (whose name is Latin for “the other”) is emerging from stealth mode this week to debut its Ethernet-over-copper systems at the National Fiber Optics Engineers Conference in Orlando.

“Ethernet over copper would open up Ethernet to the mass market of small and medium businesses and branch offices,” wrote the Yankee Group's Nicholas Maynard in a July report. “If it is generally accepted and widely deployed, this will result in a large boost—enough for the service to take the principal share of the [dedicated Internet access, private line and wide area network] markets in the next five years.” Using RHK's numbers, Ceterus estimates its 2004 addressable market to be 80,000 ports in North America (or $400 million) and 600,000 ports worldwide (or $3 billion).

Using what Ceterus executives call a “superset” of existing technologies, such as virtual concatenation, generic framing procedure and LCAS, the company engineered a universal transport platform as a differentiator. Its products—the UTS900, UTS1000 and UTS1100—can split big Sonet pipes (from multiple DS-1s and DS-3s to OC-12s) into multiple simultaneous client services, including TDM, SAN, 10/100 Ethernet or gig-E.

“RHK tends to believe Sonet's going to overtake Ethernet switching and blah-blah-blah,” said Mike Horton, senior director of marketing for Ceterus. “That remains to be seen. We don't really care. All those ports are available to us.”

The “sweet spot” for bandwidth efficiency and cost justification is at 10 Mb/s, according to Ceterus. The company considers its most fertile market to be businesses that want more than a T-1 of bandwidth—for example, those that want to add emerging Ethernet applications.

However, complete Ethernet-over-copper standards are a long way off, so Ceterus isn't expecting to sell to RBOCs for a while. For now, the startup will sell to a mix of interexchange carriers, competitive local exchange carriers, cable operators, enterprises and educational institutions. International markets will follow once Ceterus gets solid footing in the states. Ceterus gear is currently in trials with four IXCs, and it has received certification of trial completion from Global Crossing. Ceterus is allowing its customers to deploy the gear and sell the service before paying Ceterus, ensuring a low entry risk in addition to returns on investment under six months.

William Szeto, the founder, president and CEO of Ceterus, is no stranger to startups. He sold Monterey Networks and its massive wavelength router to Cisco Systems for half a billion dollars in stock during the peak of the bubble. Cisco later discontinued the product.

In fact, when Ceterus collected its first round of funding back in late 2001 ($13.5 million, from ComVentures and Sevin Rosen Funds), the company's initial business plan involved bonding wavelengths in the long-haul space. As the long-haul market deflated, the universal transport aspects of that early research were then applied to access networks to get ahead of an Ethernet-over-copper market that has not yet emerged.

“It's the right time and the right place,” Horton said. “We're ready.”