Ethernet services have fast emerged as one of the hot growth areas for carriers, second only to IP-VPN as a corporate WAN solution as both technologies supplant frame relay and ATM as the managed data solutions of choice. Analyst firm Ovum is projecting the overall global Ethernet market to grow at a 14% CAGR to $40 billion over the next five years, with multipoint services pegged as the fastest growing sub-segment at 32% CAGR to 2015.
But one of the challenges of offering Ethernet services is the reach of the operator's network, which is an issue because Ethernet services are often sold with SLAs and class-of-service guarantees. For all the talk of Ethernet being a standardized technology, the reality is that operators typically tweak the specs to cope with packet-based issues like delay, jitter and packet loss, and define their SLAs and CoS guidelines accordingly. That's fine for Ethernet traffic that stays on your own network, but disastrous if the customer needs the service via a PoP on someone else's network. Unless each carrier's Ethernet CoS support is aligned, it's impossible to enforce SLAs or guarantee CoS once it goes off the network. And until recently, there was no standard way to off Ethernet traffic from one network to another via an Ethernet network-to-network interface (E-NNI), forcing carriers to negotiate NNIs on a bilateral basis.
That changed in April this year with an initial set of E-NNI standards released by the Metro Ethernet Forum. What's also changed is that carriers have another option for extending Ethernet services outside of their networks: Ethernet exchanges.
The past year has seen a sudden flood of Ethernet exchange services which, as the term suggests, provide interconnection for Ethernet services in an exchange format, similar to bandwidth exchanges. Equinix launched the first carrier-neutral Ethernet exchange service in North America in October 2009, quickly followed by several other players, including CENX, Telx and Neutral Tandem. Now Ethernet exchanges are poised to become a $674 million business worldwide in 2014, according to Vertical Systems Group.
And while most of the Ethernet exchange activity has initially been centered around North America and Europe, it's already starting to expand into Asia-Pacific. Equinix hosts an Ethernet exchange in Tokyo, and plans to launch another exchange in Hong Kong in Q2 next year. CENX opened its first Ethernet exchange in Hong Kong last month to serve as a regional Ethernet interconnect hub.
However, the level of competition also means carriers have to look more closely at different Ethernet exchange offerings to make sure their needs are met. And needs for Ethernet services ?as well as the requirements of customers who buy them ?vary widely enough that, for some carriers, Ethernet exchanges will only be able to do so much.