Mid-band Ethernet hits the big time

The mid-band Ethernet market has been bubbling for a few years, but it passed an important tipping point last week when BellSouth became the first Bell carrier to deploy the technology and offer the service.

Starting this month, BellSouth will add 2 Mb/s, 4 Mb/s and 8 Mb/s metro Ethernet services to its existing 10 Mb/s and 1 Gb/s offerings, and it will deliver them over bonded copper pairs. The service is a natural for small and medium-sized businesses that don't have access to fiber or have outgrown their 1.5 Mb/s T-1 lines but don't need a 45 Mb/s T-3 or even the 10 Mb/s, where most metro Ethernet services start. For large enterprises, it should help carriers migrate low-speed home and remote offices from frame relay to Ethernet, said Rosemary Cochran, Vertical Systems Group analyst.

“Most frame relay sites today are T-1 and below, and a lot are 56 kb/s,” Cochran said. “If you're going to replace frame relay with [virtual private local area network service], you need a solution to migrate those customers. Right now [VPLS] can't [replace frame relay] because it's not nationwide, and there's a serious speed gap that isn't being filled.”

About a million small and medium-sized U.S. businesses will migrate from T-1s and frame relay to Ethernet services over the next five years, Vertical has estimated.

The BellSouth deployment also has big implications for the Ethernet first mile equipment space. Last month, Infonetics Research principal analyst Michael Howard said 2006 will separate winners and losers in this segment and that, based on contract activity, Hatteras Networks was shaping up to be one of the segment's leaders. Winning BellSouth as a customer (which may have informed Howard's assessment, as it actually occurred last fall) certainly elevates Hatteras above its peers.

So far, start-ups and smaller firms, including Actelis Networks, Anda Networks and Overture Networks, have offered Ethernet-over-copper equipment. Adva Optical Networking acquired Covaro Networks last fall, and Zhone Technologies formally entered the space this spring. Overture Networks, also recently funded, has partnered with ADC and Tellabs. But the BellSouth deployment — in all major markets and many secondary markets across nine states — is sure to get the attention of larger vendors.

In June, Hatteras announced European partnerships with Alcatel and Siemens along with a new $21 million funding round. And with $10.5 million in new funding of its own the same week, Anda Networks hinted at imminent plans for a big-brother partner of its own.

“The BellSouth announcement was a major milestone in getting some attention on Ethernet-over-copper and the mid-band space,” Cochran said. “Usually it takes a deployment by a major carrier to make [major vendors] say, ‘We need to be in that space.’”

It may also drive the next generations of the technology. Hatteras' G.SHDSL-based gear can serve customers within 12,000 feet, which BellSouth believes will allow it to serve 40% of its addressable market over copper. (About 45% of its existing 10 Mb/s customers are within 2 miles of the Cisco Systems Ethernet switches that deliver that service.) But “future phases of this product,” expected in the first half of next year, will be closer to customers, said Jon Ward, BellSouth's senior product manager. “Our goal is to address 90% of our customer base or more and to increase the bandwidth we can offer over copper to at least 10 Mb/s.”

Last month Actelis Networks (which named a former BellSouth executive to its board after having lost that account to its chief rival) unveiled the first Ethernet-over-copper repeater, which it said can reach customers more than 25 miles away. The company no doubt hopes to use that technological edge to win the next Bell customer.