802.3ah-ha!

On the third day of Supercomm 2004, the standards board of the Institute of Electrical and Electronics Engineers approved standard 802.3ah, also known as the Ethernet first mile, or EFM, standard, a long-awaited action that must have sounded like a dinner bell to carriers hungry to deliver metro Ethernet services beyond the footprint of their fiber networks.

Equipment vendors such as Hatteras Networks and Actelis Networks already had been pushing Ethernet-over-copper equipment into the market well before Supercomm, but the official standard gave carriers the confidence to take the technology much more seriously.

The number of paying customers for Ethernet-over-copper gear hasn't jumped in the seven months since the EFM standard was ratified, but by most accounts, the level of activity in the sector has swelled noticeably in response to the IEEE's imprimatur. According to Howard, Ethernet-over-copper technology is already being used by at least one Bell company, a couple of interexchange carriers, and some Canadian and European incumbents. An Asian incumbent carrier is soon to follow.

“The standards made a big difference,” said Michael Howard, Infonetics Research analyst. “A lot of carriers were waiting for that.”

Start-ups Actelis and Hatteras are leading the way, and in that order, Howard said, partly because, “Actelis got there first.” Both companies are selling products commensurate with the long-range version of the EFM standard, based on G.SHDSL, which specifies the transmission of up to 2.3 MB/s or 5.7 Mb/s per copper pair over distances up to 2700 meters (about 1.7 miles). Hatteras claims to be working on products that apply to the short-range version of the standard as well, which is based on VDSL and refers to symmetrical bandwidth speeds of 10 Mb/s per copper pair over a span of up to 750 meters (about half a mile). But Hatteras won't elaborate on those plans. Actelis, on the other hand, says it currently has no plans to develop a VDSL product, though it says it's watching the market.

For now, Hatteras aims to differentiate itself based on its gear's ability to support different service level agreements for different services so that carriers can give voice traffic a higher priority than, say, Internet access. Unlike Actelis, Hatteras' system includes complete Ethernet switching functions, which are not as important in, for example, point-to-point wireless backhaul transport applications that don't require switching but could come into play for carriers wanting to deliver high-bandwidth services to multiple customers (e.g., in a single building) as efficiently as possible over a common infrastructure.

Hatteras CEO Kevin Sheehan won't say how many customers the company has beyond saying it's a double-digit number. Actelis claims to have between 40 and 50 customers, about half of which are in the U.S., according to Yossi Saad, the vendor's vice president of product marketing. In addition to the CLEC customers it has already named, Saad claims one of the Bell companies it is in communication with has approved Actelis's gear and is “deploying it wherever they have a need.” However, Saad also claims Actelis is the only vendor with generally available products compliant with the 802.3ah standard, a charge other vendors, including Hatteras, flatly reject.

Vendors cite the military as an eager customer because it's replete with bases fed by a lot of copper, which IT managers would much rather use existing plant than bury new fiber. Ethernet-over-copper gear is also a hit among CLECs looking to chip away at incumbent business customers with metro Ethernet services, Saad said. Midwestern CLEC Internet Express stole an ILEC customer last spring with the help of Actelis' MetaLight platform, offering a local school more bandwidth at a lower cost and using the incumbent's own copper pairs to do it. In Washington, Allied Telecom is taking business away from Verizon Communications in the same way. And each story in turn helps Actelis sell its wares to those incumbents, Saad said.

“If a CLEC starts delivering 10 Mb/s services at the same price as one or two DS-1s from the RBOC, [the RBOC] will have to react or they'll start losing business customers,” Saad said.

Part of the work cut out for vendors is simple education and publicity, especially among independent telcos, many of whom haven't yet heard of 802.3ah and are accordingly skeptical of the technology's claims.

“There's still an issue we see every day of folks just not knowing this is possible,” Sheehan said. “We make a lot of noise about it, but not that much noise.”

As chip vendors invest in the space (and according to Saad, they're starting to), the number of vendors should multiply, and the noise should get louder.

When the sector begins to really bloom, major Ethernet equipment vendors such as Cisco Systems and Extreme Networks are expected to take the reins, not improbably through acquisition of the leading vendors.

“If we see a $50 million year, the Extremes of the world will hop in there,” said Howard, who expects revenues for EFM equipment to total in the low tens of millions this year.

To some extent, larger vendors already have begun to stick their fingers into — or at least just above — the pie. Alcatel was active in the development of 802.3ah. Cisco introduced what it called “long-reach Ethernet” gear in 2001, which is not heard about much these days, at least among equipment vendors and analysts. And Adva Optical Networking announced in November 2004 that its FSP 150 Ethernet access transport system had completed EFM compliance testing at the University of New Hampshire's interoperability lab.

Some vendors didn't make it this far. Spediant Systems, a subsidiary of Israeli company Orckit Communications, launched an SDSL bonding product for Ethernet-over-copper in late 2002. But when Orckit's other subsidiary, Corrigent Systems, won a large contract with Japanese carrier KDDI, Orckit diverted Spediant's engineers to Corrigent in order to help carry the workload, and Spediant was shut down.

“It was a shame,” said Rick Hill, network manager for Canadian carrier Wightman Telecom, one of the first to deploy Spediant's EML 8000. “It was really a good product, and it worked quite well for us. It's fairly solid, so we don't need a lot of support with it. But if we have a problem, we're going to replace it with something else.”

Another equipment maker, Valo, met its end in late 2003 at the age of 2, but it was reincarnated shortly thereafter by its founders, who used Valo's brainpower and intellectual property to create Klamath Networks, which has been in stealth mode for nearly a year and is currently hiring at least one engineer, according to the company's Web site. Though Klamath's specific plans are secret, Valo was focused on DSL-based Ethernet-over-copper.

Another group of vendors — including Covaro Networks, Ceterus Networks, Anda Networks and Overture Networks — is taking a more versatile approach to the market, using circuit bonding to treat Ethernet-over-copper as just one potential application in a broader offering of Ethernet-over-whatever. Wholesaler Progress Telecom, for example, uses Covaro gear to Ethernet-enable its Sonet network in order to offer a wholesale metro Ethernet service.

Canadian carrier Bruce Municipal Telephone System, on the other hand, uses Covaro to do Ethernet-over-copper. Covaro, like HyperEdge and Metrobility Systems, has focused on operations administration and maintenance of metro Ethernet networks. With a small and medium-sized customer under its belt, Covaro's next goal is to land a top-tier carrier within the next few quarters.

Ceterus Networks uses the International Telecommunications Union's G.7043/Y.1343 virtual concatenation recommendations to bond T-1 and E-1 lines, finding particular demand in wireless backhaul applications, especially as wireless carriers move to add EV-DO to base stations largely comprised of T-1s. Whereas the 3-year-old start-up was in “quiet mode” last summer, it's now described to be “in revenue stage” with 20 customers and a new three-year contract with a major Tier 1 carrier in the U.S. that Ceterus expects to be able to name publicly soon.

Ceterus's leaders are quick to point out the advantages they claim their system has over the likes of Actelis and Hatteras. Unlike those DSL-based systems, Ceterus's gear does not have distance limitations, said company CEO Dave Stehlin, and it fits well with IXCs because the equipment can be deployed in an IXC point of presence rather than in an incumbent's central office, where space must be leased. Actelis' Saad noted that such space-leasing costs are deferred over the long term by metro Ethernet's superior economics.

Still, the two groups of vendors probably complement, rather than compete with, each other.

“I think carriers will want all those options,” Howard said.

Both aim to let carriers make the most of existing networks but in different ways. EFM vendors allow carriers to roll out new and better services over existing copper lines, and circuit-bonding vendors help carriers pack multiple transmissions over the same copper or fiber lines. That distinction is probably why Hatteras and Actelis don't appear to be watching Ceterus et al. too closely.

As Hatteras's Sheehan put it, “I have a hard enough time keeping up with the stuff we do.”