By Sean Buckley
If there is one word to describe the competitive local exchange carriers (CLEC) providing Ethernet services it would be "diverse."
Take a look at our featured CLECs' metrics. (Image source: iStockPhoto)
Every one of the seven players in this third installment of our Ethernet ecosystem series approaches Ethernet from a different angle.
While some players like tw telecom (Nasdaq: TWTC) and XO Communications took early bets on delivering Ethernet to medium and large businesses, others like Integra really started to make their name in Ethernet over the past three years as they migrated from a small to medium business (SMB) focus toward delivering services to larger businesses.
"There are a lot of different types of companies," said Rosemary Cochran, principal of Vertical Systems Group in an interview with FierceTelecom. "It's not as homogenous as the cable companies and incumbents because they came from different places and different models."
CLECs may be a diverse lot in the Ethernet service ecosystem, but their presence is centered on giving medium and large businesses an alternative source that can provide more hands-on attention than they have gotten from larger incumbents.
Here's a breakdown of the performance of the seven CLECs delivering Ethernet:
tw telecom: The provider took an early bet on Ethernet at a time when most traditional service providers were stuck on delivering traditional T1 and Frame Relay (FR) services. Already present in over 75 markets with a deep set of metro fiber assets, tw telecom has seen consistent Ethernet growth every quarter. In Q4 2012, the CLEC reported that data and Internet services revenues increased 4.6 percent sequentially to $197.8 million as the result of growth in strategic Ethernet and VPN-based product sales.
Some of the differentiators tw telecom brings to the table are its one-to-many national Ethernet interconnection solution and its Dynamic Capacity capabilities. The one-to-many feature enables other competitive providers to instantly expand their out-of-region Ethernet and network reach, while the Dynamic Capacity product allows existing customers to dial up bandwidth as needed.
Supporting its Ethernet service base is a growing set of on-net building assets. As of the end of Q4 2012, tw telecom had a total of 17,948 buildings served by its fiber network, reflecting what it says was "an increase of 497 from ongoing success-based investments in addition to an increase of 532 previously connected buildings that were identified during an alignment of key operating systems in 2012."
Level 3 Communications: Although Level 3 (NYSE: LVLT) has a lead over XO Communications in the CLEC Ethernet race, Cochran said it is in a "real dead heat" with XO. Already a well-established fiber-based Ethernet provider, Level 3 expanded its Ethernet and VPN service presence by acquiring Global Crossing. Level 3 also enables its switched Ethernet offering with its MPLS/IP VPN or its Ethernet Private Line solution.
During Q4 2012, the provider's Core Network Services (CNS) revenue grew 1.8 percent sequentially and 4.7 percent year-over-year to $1.42 billion, while Enterprise CNS revenue rose by 2.2 percent sequentially and 7.8 percent year-over-year to $911 million from $889 million and $851 million respectively.
XO Communications: XO built greater metro Ethernet presence through a mix of fiber-based Ethernet and Ethernet over Copper (EoC). On the fiber-based Ethernet side, the service provider has over 3,000 buildings on-net. Last fall, the service provider made its biggest push when it introduced a 100 Mbps EoC access speed and expanded its nationwide Ethernet access network to almost 2 million business locations. In addition to deploying its own network facilities, XO has external network-to-network interface (E-NNI) agreements with various traditional carriers and cable companies.
Looking toward the rest of 2013 and 2014, XO plans to start offering an asymmetric Ethernet service tentatively at the end of the year. "Everything we have focused on so far has been symmetrical services, but one thing we're looking at is some asymmetrical services," said Sam Koetter, senior product manager for XO, in an interview with FierceTelecom. "It would be something like 20 Mbps down and 3 Mbps up at a much lower price than our current symmetrical service."
Cogent: Touting itself as the low-cost Ethernet provider, Cogent (Nasdaq: CCOI) has been primarily focused on providing dedicated Internet access (DIA). Similar to other competitive providers, Cogent continues to enhance its reach, adding 35 new on-net buildings in Q4 2012, ending the quarter with a total of 1,867 on-net buildings. Cogent added 35 new on-net buildings in Q4 2012 and ended the quarter with a total of 1,867 on-net buildings, up from 1,832 buildings in Q3 2012. On-net service is provided to customers that are located in buildings physically connected to Cogent's network.
Zayo: This provider's Ethernet story has been about aggressive buildout of its fiber networks through organic efforts and acquisitions along key routes in Washington, D.C. and the Southern states. One of its largest acquisitions was AboveNet in 2012, a competitive provider focused on providing higher-end bandwidth solutions to market segments such as the financial industry and the research and education arenas. By acquiring AboveNet, Zayo expanded its fiber footprint and service portfolio, and gained a set of sales people to sell retail Ethernet services.
This is a bit of a change in strategy for Zayo, as it was initially focused on selling wholesale services. "Zayo is well positioned because they have picked up the AboveNet customer base, including financial companies," Cochran said. Besides AboveNet, it purchased four other regional fiber-centric service providers--FiberGate, First Communications, Litecast, and USCarrier--and increased net installations. These moves enabled Zayo to expand its fiber footprint in the Washington, D.C., area, the Southeast, the Northeast and Midwest.
Reliance Globalcom: Leveraging the assets it purchased from Yipes, Vanco and the FLAG submarine cable system, Reliance Globalcom has points of presence (PoPs) in 37 countries, enabling it to deliver Ethernet and other services to larger multinational corporations (MNCs). Reliance Globalcom is an attractive alternative, especially to MNCs that need connectivity outside of the United States into other countries in Asia Pacific, Europe, India and the Middle East. It has over 750 local service provider partners in more than 123 countries worldwide, meaning that an MNC can get broad coverage.
Over its diverse set of submarine cable and terrestrial assets, Reliance delivers six main Ethernet services: Ethernet private line (EPL), Ethernet private line point-to-multipoint (EPL P2MP), managed premium Internet (MPI), multiprotocol label switching virtual private network (MPLS VPN), global Ethernet and global Ethernet virtual private line service (VPLS).
Integra: Serving primarily the small to medium business (SMB) market for much of its 13-year existence, Integra has realigned its focus to pursue larger business accounts over the past two years. As its appeal has grown amongst larger customers as a solutions provider with various IP products, the CLEC rebranded itself as "Integra," dropping "Telecom" from its name.
Under the leadership of Level 3 co-founder Kevin O'Hara, the CLEC has continually extended its on-net fiber building footprint to reach a larger set of medium-sized customers such as local government and hospitals.
Complementing its growing base of on-net fiber-based Ethernet, Integra has aggressively expanded the rate and reach of its EoC network. Last fall, Integra introduced a 60 Mbps symmetrical EoC service, extending Ethernet service into areas that it can't currently can't reach with fiber. Offering double the capacity of its previous 30 Mbps offering, its 60 Mbps EoC service is available throughout its 11-state network. With EoC, Integra said it can reach over 400,000 businesses and is carried over its fiber-fed local service offices (LSOs) that are linked to the company's fiber backbone.
Take a look at these CLECs' metrics in the following chart.
Also, please check out the other reports in our Ethernet ecosystem series: EoC makes a new dent in Ethernet market and Cable MSOs: A phoenix rising in the Ethernet industry.