Carrier Ethernet Get Friendlier with New Exchanges

By: Paula Bernier

Providers of carrier Ethernet services can now expand their footprints and/or sell their services wholesale via two new carrier Ethernet exchanges brought to you by startup CENX and data center outfit Equinix (News - Alert).

The worldwide Ethernet services market was $22 billion in 2008, but it is positioned to get a big bump from this new interconnection capability, according to analyst Michael Howard (News - Alert) of Infonetics Research.

“I believe the ability for service providers to quickly and economically interconnect with their peers could add as much as $4.7 billion in 2013 in global Ethernet services revenues to help reach almost $39 billion total in that year,” Howard says.

CENX is a new company run by Nan Chen that has launched a handful of new carrier Ethernet exchanges. In addition to being the president and CEO of CENX, Chen is well known for his position as president and board director of the Metro Ethernet Forum (News - Alert). In fact, it was the MEF that suggested the need for an independently-owned carrier Ethernet exchange such as the one CENX now delivers within the large carrier hotels in Chicago, Los Angeles and New York.

Chen tells INTERNET TELEPHONY that when the MEF (News - Alert) defined carrier Ethernet about five years ago, it understood that interconnect would be a key challenge to enable the service to become widespread. He explains that interconnect is especially challenging with carrier Ethernet given its range of speeds, and its flexibility to support various SLAs and levels of delay, jitter and other performance parameters. As a result, the forum created a committee to look at interconnect issues, he says, and that committee decided the best way to address carrier Ethernet interconnect was to form an independent company.

So that’s exactly what Chen, and some of the other founding MEF officers who still work in the MEF, did. But while CENX has some management crossover with the MEF, and the exchange is fully aligned with the MEF strategy and mission, Chen emphasizes that it is an independent company funded by private investors.

CENX Marketplace is a portal that shows members what services, including their speeds and other performance parameters, are available. Chen says in some cases CENX will do translation mapping between different tags or classes of service, but he wouldn’t elaborate on the details on that front.

Buyers of CENX member services are charged on a per connection basis, with CENX receiving a cut of each transaction. All connections to the CENX exchange – which are at 350 E. Cermak and 427 Lasalle in Chicago, 1 Wilshire in Los Angeles, and 60 Hudson in New York – are fiber based at either 1gigE or 10gigE, and can be in protected or unprotected mode, says Chen.

Equinix, meanwhile, is offering carrier Ethernet exchanges through its own data centers in Chicago, London, New York and Silicon Valley, says Jarrett Appleby, chief marketing officer at the company. Carriers can connect to them through 1mbps or 10gbps ports.

In fact, Appleby says Equinix has had this environment running for about two years, during which time it used the capability internationally. Equinix late last year announced seven carrier customers of the service. That includes AboveNet, Exponential-e, Hibernia Atlantic (News - Alert), Level 3, PCCW Global, Reliance Globalcom and Tinet. The exchange was in preproduction late last year, with plans to go live in the first quarter.

“As a leading international provider of fiber-based communications services, Level 3 is helping our customers keep pace with the demands of an increasingly networked world. Our customers are turning to Ethernet to support applications like server virtualization, cloud computing, and data center consolidation,” says Russell Shriver, Level 3's vice president of Internet and data services. ”Today, business is dispersed all over the world, and it's technically challenging, time-consuming and costly for enterprises to pull together end-to-end Ethernet services. By working with Equinix, Level 3 will expand its ability to provide a seamless, high-performance Ethernet offering.”

Of course, the alternative to using these carrier Ethernet exchanges or something like them is to interconnect on a one-on-one basis with other providers. As Chen notes, that method has proven uneconomical, unprofitable and painfully slow – typically taking between four and eight months per interconnection deal.

For buyers, Chen says, the CENX can help increase revenues by 90 percent or more, realize up to 55 percent on the cost of sales and up to 95 percent in new service startup costs. Sellers, he adds, will be able to see 50 to 100 percent increased revenue by leveraging their existing footprints at minimal cost.

“For sellers this is an amazingly revenue rich opportunity,” adds Chen, noting that if a seller has 1,000 lit buildings in its footprint and uses CENX to sell just one additional connection to each of those buildings, it could see a $20 million annual increase in revenue. IT

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