November 2013
S P E C I A L
R E P O R T
Defining the Value
of Ethernet Services
Table of Contents
Introduction............................................................................ 3
What Are Ethernet Services?.................................................... 4
Service Types
Service Domains
What Are the Benefits of Ethernet?............................................ 6
Why Are Businesses Buying Ethernet?........................................ 7
Demand
Drivers
What Are the Applications for Ethernet?.................................... 9
What Are the Challenges With Ethernet Services?..................... 11
What Should You Look for in an Ethernet Service Provider?........ 12
Provider Types
Market Leaders
Selection Criteria
Defining the Value of Ethernet Services
2
Introduction
T
he buzz around carrier Ethernet is understandable. Ethernet is
highly scalable, extending from megabit to gigabit speeds to
accommodate growing bandwidth demand for typical WAN
applications like site-to-site connectivity and Internet access, as well
as even more bandwidth-hogging ones like video, medical imaging
and access to cloud-based services.
In addition, Ethernet offers the flexibility to order incremental
bandwidth in much more granular chunks than is available with
traditional circuits.
These alone are attractive traits, but they are shored up by the fact
that Ethernet is a familiar and simple network technology — invented
in the ‘70s for data communications in the local area network —
and that its ubiquity in the LAN gives it a lower cost basis than
other technologies.
As a result Ethernet services are in increasing demand by businesses
like yours. One forecast says that U.S. enterprises purchased more
Ethernet services than legacy services for the first time in 2011. This
Report will shed more light on the value of Ethernet services for
your business.
Defining the Value of Ethernet Services
3
What Are Ethernet
Services?
Initially, carrier Ethernet extended low-cost LAN-based Ethernet to the WAN. Today,
it offers various bandwidth and QoS features that make it useful as a transport for your
voice and video applications as well as data.
Ethernet services are delivered as point-to-point or multipoint services over dedicated
or virtual connections. Ethernet services are available over various access methods,
such as high-speed fiber, DSL, cable, wireless and even traditional T1 lines, so it can be
used at a majority of your office locations. It’s widely available in speeds from 1Mbps
to 10Gbps and in some cases up to 100Gbps to meet your growing bandwidth needs.
Service Types
Ethernet services are marketed under various namesm, such as transparent or native
LAN, Ethernet, Gigabit Ethernet, GigE, metro Ethernet, Ethernet private line, Ethernet
virtual private line, Layer 2 virtual private network, Ethernet access and virtual private
LAN service, but there are just a few common Ethernet service types:
E-Line, or Ethernet Private Line (EPL), is a point-to-point service using dedicated
bandwidth, that allows you to privately transmit mission-critical data between locations.
EPLs are idea for bandwidth-intensive applications and are the most popular Ethernet
service due to their simplicity. A point-to-multipoint (hub-and-spoke) variation using
shared bandwidth commonly is referred to as Ethernet Virtual Private Line Service (EVPL)
Ethernet Private Line Service
Customer E-Line Point-to-Point Service
Premises
UNI
UNI
Carrier Ethernet Service
E-line services create one Ethernet virtual connection (EVC) between user network
interfaces (UNIs).
Defining the Value of Ethernet Services
4
E-LAN, or Ethernet LAN, service enables any-to-any communication between all
customer locations via a multipoint-to-multipoint Ethernet connection. An E-LAN can be
used to create a transparent LAN service, such as a multipoint Layer 2 VPN. A variation
on this is E-Tree, which is rooted multipoint connectivity (hub and spoke) and is used
for broadcast applications where services flow from a centralized point.
Ethernet LAN Service
E-LAN Multipoint Service
UNI
UNI
UNI
UNI
Customer
Premises
Carrier Ethernet Service
E-LAN services create multiple Ethernet virtual connections (EVCs) between user
network interfaces (UNIs).
Ethernet access services are point-to-point services that connect an enterprise
customer with a service provider point of presence to support capabilities, such as
dedicated Internet access or connectivity to Layer 3 VPNs.
VPLS, or Virtual Private LAN Service, is a LAN extension service that runs over an MPLS.
It also can be thought of as a Layer 2 multipoint VPN. Unlike Layer 3 VPNs, VPLS does
not require premises-based routers. Instead you can use an Ethernet switch to connect
to the service provider network. You also can use any type of access link that supports
Ethernet communications. (Note: Some service providers may market VPLS service as
an E-LAN service and may not use the term VPLS.)
Service Domains
Ethernet services are available for different domains or geographies where you need
connectivity, including:
• Access Network — Often referred to as the last-mile, this is the connection
between your building and the service provider network.
• Metro Area Network (MAN) — Just as it sounds, this is connections between your
office locations within a metropolitan area.
• Wide Area Network (WAN) — This includes the connections between locations
that may be across the country or even the globe.
Defining the Value of Ethernet Services
5
What Are the Benefits
of Ethernet?
Ethernet services offer many advantages, including:
High Bandwidth. When first introduced, Ethernet supported a data rate of up to
10Mbps. Later Fast Ethernet increased 10 times to 100Mbps and, later still, Gigabit
Ethernet increased that 10 times to 1,000MBps. Today, gigabit speeds up to 100Gbps are
possible (though most businesses don’t require that much bandwidth), and
carriers now are looking at deploying technology that supports 400Gbps.
Scalability. Ethernet bandwidth can be increased on a granular basis up
to the physical port size. In contrast, growing a TDM network from DS1
(1.5Mbps) to DS3 (45Mbps) to OC3 (155Mbps) requires forklift upgrades.
Low Latency. Ethernet is switched rather than routed, so it generally
Ethernet is able
has lower latency and generally is considered preferable to router-based
to handle your
protocols such as MPLS and VPN in settings where milliseconds are crucial.
growing speed
Low Cost. Ethernet is able to handle your growing speed and bandwidth
and bandwidth
requirements for less money than other connectivity methods. For example,
requirements for
a T1 delivering 1.5Mbps costs around $300 per month, while 3Mbps
less money than
asymmetrical Ethernet costs about the same. That means you can get
other connectivity
twice as much bandwidth for the same price. This is great news if you are
using bandwidth-intensive apps, such as voice, video and cloud services.
methods.
Defining the Value of Ethernet Services
6
Why Are Businesses
Buying Ethernet?
Demand
Adoption rates for Ethernet services are soaring, propelled by its cost effectiveness,
high-bandwidth scalability, availability and overall flexibility for connecting to cloud and
data center virtualization applications, according International Data Corp (IDC). The
research firm’s latest forecast, published in October 2013, found the total U.S. Ethernet
revenue will increase from $6.2 billion in 2013 to $10.1 billion in 2016. A September
2013 forecast from The Insight Research Corp. shows similar growth — from nearly
$5.5 billion in 2013 to more than $13 billion by 2018 — with a compound annual
growth rate of 19 percent. In all, Insight predicts U.S. enterprises will spend more than
$49 billion over the next five years on Ethernet services. The research firm also noted
due to price declines of 10 percent or more per year, Ethernet revenue is growing
slower than traffic.
IDC noted widespread adoption of Ethernet services across domains — wide area
networking, metro area connectivity and
access. Furthermore the research firm is finding
increasing demand for ever greater speeds.
“Today enterprises are increasingly utilizing
100 megabit, gigabit, 10 gigabit and even some
40 gigabit Ethernet services for their domestic
 2013
and international WAN networking,” said Nav
$
U.S. Ethernet Services
Revenue Growth —
2013-2016
Chander, IDC’s research manager covering U.S.
enterprise communication services. “We are
also seeing a lot of U.S. enterprises upgrading
their Ethernet bandwidth and adding more
applications and business locations on-net
because of the economics and faster time-toservice compared to the alternatives.”
6.2
BILLION
2016 
$10.1
BILLION
Source: International Data
Corp., October 2013
Drivers
According to Insight Research, Ethernet’s popularity is driven by its ability to meet
growing bandwidth demands at lower cost and with greater flexibility than legacy
TDM-based services. In addition, IDC said enterprises rank security as one of the most
important features of Ethernet, followed by access to their IP VPN, and service monitoring
and reporting.
Defining the Value of Ethernet Services
7
The primary drivers of Ethernet adoption among U.S. enterprises are high-bandwidth
applications, such as data center interconnectivity, disaster recovery/business continuity
and data storage replication. Indeed, for enterprises, implementation of high bandwidth
Ethernet connectivity between data centers is one of the fastest growing requirements,
IDC said in its October 2013 report. The research firm noted that more medium businesses
also are adopting Ethernet as they migrate to VoIP, employ storage networking and
access cloud-based services.
Similarly, in its midyear 2013 Ethernet market share report, Vertical Systems Group
noted Ethernet providers cited an uptick in demand for connectivity to private clouds
using E-Line services. The fastest growing offerings during the period (first half of 2013)
were Ethernet access to IP MPLS VPN services and cloud connectivity.
Defining the Value of Ethernet Services
8
What Are the
Applications for
Ethernet?
Ethernet is well suited for supporting a wide range of applications, including:
Private Line Replacement. One of the biggest uses for Ethernet is to replace your
private lines using T1 circuits or other legacy technologies, such as frame relay and ATM.
Dedicated Internet Access. You also may opt to use Ethernet virtual private lines
to connect to your Internet provider. If you have multiple locations, the service provider
can provision multiple virtual connections — each connecting to a separate customer
location — over a single physical connection into the Internet provider’s PoP (see diagram,
Ethernet Dedicated Internet Access, below).
Ethernet Dedicated Internet Access
Metro Ethernet Network
UNI 1
Service
Multiplexing
EVC 1
ISP
POP
EVC 2
UNI 3
UNI 2
Ethernet access provides an Ethernet virtual connection (EVC) from the user
network interface (UNI) to the carrier Ethernet network and then to the Internet.
Source: MEF
Multilocation Business Interconnection. Ethernet’s ability to support multiple
virtual connections over a single physical link makes it a good choice if you have multiple
locations. If most of your traffic is to and from a headquarters location, you may want
to set up Ethernet private lines from each branch office to headquarters, which would
have a single physical connection supporting multiple virtual connections to each of the
branch offices. If a considerable amount of your traffic is exchanged between individual
branch offices (via VoIP, for example), your individual locations can be connected through
a full mesh, with each location having a virtual connection to every other location.
Defining the Value of Ethernet Services
9
Data Center Interconnection. If you operate your own data centers, you likely have
multiple data centers backing each other up and automatically exchanging information
so that redundant data is stored at each location. The trend toward “big data,” with
enterprises retaining and analyzing huge amounts of customer information, means that
the amount of data exchanged between data centers is growing larger. The data rates
required between these data centers may exceed what can be supported by legacy
communications technologies such as ATM or frame relay, making Ethernet an excellent
solution. And while MPLS, like Ethernet, can support higher data rates, it typically is
more expensive than Ethernet, particularly at those high data rates.
Cloud Connectivity. Today, the Internet is the primary delivery
mechanism for cloud services. As a result, you may have been reluctant
to move mission-critical applications to the cloud, citing concerns over the
lack of security, guaranteed performance and, in some cases, regulatory
compliance. Ethernet, on the other hand, boasts characteristics that are
Ethernet boasts
aligned with the network requirements for cloud-based services, including
characteristics
high bandwidth, low-latency, security and scalability.
that are aligned
Data-Storage Replication and Networking. As your company
with the network
generates more data, it not only needs more storage, but the ability to
replicate that data in an off-site data center to ensure it is available in
requirements
the event of a disaster or outage. Ethernet’s speed means the replication
for cloud-based
and backups are done in seconds or minutes, rather than hours. And if
services, including
your employees are going to be using more data such as video during a
high bandwidth,
scheduled backup, you can request more bandwidth to ensure the backup
low-latency,
runs smoothly alongside regular work activities.
Business Continuity/Disaster Recovery. Similar to data-storage
security and
replication and networking, the speed and consistency of Ethernet means
scalability.
it is well-suited to support business continuity and disaster recovery. You
can use Ethernet as a secondary network so that in the case of an outage,
failover takes milliseconds. Ethernet also can shift traffic to pre-established virtual paths
to backup locations and data centers in the event that a disaster took the primary
location or data center offline.
Voice/Video/Imaging. Because it offers low latency, Ethernet also is specified for
your latency-sensitive applications such as those involving voice or video. Some examples
include medical imaging, distance learning and video conferencing.
Defining the Value of Ethernet Services
10
What Are the Challenges
With Ethernet Services?
While the potential for Ethernet to help your business is clear, there are some obstacles
to getting access to the services you want, including:
Availability. Ethernet-over-fiber facilities generally are desired, but fiber is not available
to all buildings. Installation can take 90-120 days from when you sign the contract.
(An on-net contract can be provisioned within 30 days typically.) As discussed, there
are alternatives to fiber-based Ethernet, including copper and wireless, but they tend
to be lower speeds.
Speed. Not all pipes can handle GigE speeds yet, but more providers are deploying
equipment that bulks up their networks with more bandwidth.
Quoting & Provisioning Delays. A majority of quotes for Ethernet services are done
manually. This takes time. And as mentioned above, a fiber build if required can extend
provisioning up to 90-120 days.
Pricing Volatility. While Ethernet generally is less expensive than other options, expect
little pricing uniformity among providers. “Pricing for the various classes of Ethernet
service remains extremely variable, with price differences from building to building in
some cases,” noted Insight Research in its September 2013 report.
Defining the Value of Ethernet Services
11
What Should You Look
for in an Ethernet Service
Provider?
Because your corporate network is really the backbone of your business, it’s important
to pick a provider that can provide you with the best performance and service levels to
match your application requirements.
Provider Types
There are a range of sources for Ethernet services. Here are examples of Ethernet
services providers in the U.S.
• Incumbent Local Exchange Carriers (ILECs), such as CenturyLink, Verizon and AT&T
• Competitive Local Exchange Carriers (CLECs), such as Windstream, XO and
tw telecom
• Cable Multiple System Operations (MSOs), such as Comcast Business, Time Warner
Cable Business Class and Charter Business
• Resellers or Aggregators, such as Bandwidth.com and NetWolves
• Specialty providers such as Wolfe, Zayo Group and US Signal
In addition, there are agents and VARs that contract with many of these providers
and can help you evaluate the best option for you.
Market Leaders
By provider type, incumbent carriers lead the U.S. Ethernet services market, with 47
percent of total Ethernet ports. They are followed by competitive providers with 33
percent of Ethernet ports and cablecos with 20 percent, according to a midyear 2013
Ethernet share report published in August 2013 by Vertical Systems Group.
“During this reporting period, the cable MSOs showed very strong market penetration.
For the first time, the Cable MSO segment had more new Ethernet port installations
than the Incumbent Carrier segment,” said Rick Malone, principal at Vertical Systems
Group. “Competition was heaviest in the mid and small business sectors served
by MSOs and regional CLECs, resulting in very favorable pricing for customers.”
The research firm’s midyear U.S. Ethernet Leaderboard shows AT&T, Verizon, tw telecom,
CenturyLink, Cox, XO, Time Warner Cable and Level 3 as market leaders. To qualify for the
Leaderboard, a provider must have 4 percent or more of billable retail port installations.
Companies in the challenger tier (1 percent or more of billable retail port installations)
include Charter Business, Cogent, Comcast Business, Integra, Lightpath, Windstream
and Zayo Group.
Defining the Value of Ethernet Services
12
Other providers selling Ethernet services in the U.S. include Alpheus Communications,
American Telesis, Bright House Networks, BT Global Services, Canby, Cbeyond,
Cincinnati Bell, Consolidated Communications, Earthlink Business, Expedient, FairPoint
Communications, FiberLight, Frontier, IP Networks, Lightower (includes Sidera Networks),
LS Networks, Lumos Networks, Masergy, Megapath, NTT America, Orange Business,
Reliance Globalcom, Sprint, SuddenLink, Tata, US Signal, Virtela and others.
U.S. Business Ethernet Services Leaderboard
— Midyear 2013
1
2
3
4
AT&T
Verizon
tw telecom
CenturyLink
5
Cox
6
XO
7
8
Time Warner Cable
Level 3
Source: Vertical Systems Group, August 2013
Selection Criteria
In addition to the normal due diligence regarding financial stability and track record,
consider the following attributes:
Sales Engineering Support. Make sure that you have access to experienced sales
engineers to assist you in evaluating your requirements and designing a cost-effective,
high-performance network.
Flexibility. Look for a provider that can deliver multiple network options and combine
or customize them to meet particular requirements.
Service Delivery. Look for a provider that can deliver on-net service quickly and, if
needed, has a track record of completing new builds on time.
Defining the Value of Ethernet Services
13
Service Level Agreements. Does the provider guarantee service performance, e.g.,
that they will be available 99.99 percent of the time and that latency and packet loss will
not exceed certain levels? SLAs are important if you have mission-critical traffic. Including
SLAs for mean-time-to-repair may be particularly important as downtime can be costly.
Customer Service. While it may seem obvious, the absence of effective customer
care is keenly felt when there is a problem. Ensure that your provider has a track
record for handling outages or other service-affecting issues promptly and with
frequent communication.
Pricing. Of course, you will want competitive pricing per port, but you also want
to consider hidden costs. Does the provider charge for customer-located equipment,
does it pass through build costs or kickbacks to property managers for building access?
Similarly, are provisioning delays or poor service performance going to cost you in other
ways, such as by delaying your ability to reach your productivity goals?
Defining the Value of Ethernet Services
14