Service providers take notice

Ethernet exchangeRegardless of the approaches these providers have put forth, the service provider community is responding to the Ethernet exchange idea, albeit a bit slowly. Thus far, the Ethernet exchange concept has, not surprisingly, attracted mainly a number of younger competitive service providers. These service providers are leveraging the Ethernet exchange as one of many ways to expand their Ethernet footprint.

Larry O'Neill, Ethernet product development manager for Verizon Partner Solutions thinks customers will embrace the concept because it takes the guesswork out of the Ethernet interconnection process for smaller carriers.

"What the niche for Verizon is today is we have our switched Ethernet service, but for a customer to take advantage of that they have to make that first purchase of an entrance facility UNI between their POP and the Verizon network," said O'Neill. "For many tier 2-3 and even tier 1 customers that becomes a barrier to entry when they are looking at the first sale being an individual location or two locations it's not convincing enough to make a direct connection with Verizon at 1 Gbps or 10 Gbps. Those customers might feel more comfortable if they are part of the exchange and working through CENX we would become an option for them through that vehicle."   

Outside of Verizon, the dominant or public service providers that have been public about the Ethernet exchange concept have been mainly competitive providers, including the likes of Covad/Megapath, Intellifiber/Cavalier, Level 3 Communications (Nasdaq: LVLT) and Optimum Lightpath.

That's not to say that other large incumbents aren't interested in the concept, however. Since many of the larger carriers have well established E-NNIs already in place, they appear to be looking at how an Ethernet exchange could help them as another weapon in the holster to expand their Ethernet reach.  

Qwest (NYSE: Q), for instance, is looking at the Ethernet exchange concept as another tool in the toolbox to consider in going out of region with Ethernet.

"We're pontificating our participation in some of them in and out of region," said Eric Bozich, Vice President, National Services for Qwest Communications. "That's an important ingredient to facilitate connecting data suppliers with data consumers and doing it the most efficient way possible. There will be a lot of configurations in terms of how Ethernet exchanges, carriers, content providers and businesses come together, but I don't see a clear winner."

Competitive carriers such as Covad, however, have jumped on the Ethernet exchange train.

Jeff Brown, vice president of Covad/Megapath Carrier Services, also going with CENX to expand their Ethernet over copper footprint where in Southern California alone, Covad's EoC service is available in over 100 central offices.

"It made sense to team with CENX because as we deal with all of these various carriers, the engagement process is pretty lengthy," said Jeff Brown, vice president of Covad Carrier Services in an interview with FierceTelecom. "This is because one carrier's Ethernet service is slightly different than someone else's. I think the business proposition at CENX is it brings partners together quicker to market and smoothing out the differences between the offerings so you get a seamless Ethernet service at the end."

Noticeably absent from the Ethernet exchange mix--at least for now--is AT&T (NYSE: T).

AT&T, while expanding its own Ethernet footprint domestically and internationally via well-established E-NNI arrangements, sees the evolution of the Ethernet exchange as being just one part of the ecosystem versus the mainstream.

"In the very beginning of the Internet, the majority of traffic got handed off to exchanges or the NAPs, but over time that evolved to private peering arrangements between carriers," said Bob Walters, executive director, Ethernet product management, AT&T Business Solutions. "I really suspect the same thing we'll happen in the Ethernet world where you'll have small guys that can't afford to build interfaces to a number of carriers and manage them." 

Of course, the initial challenge of the Ethernet exchange is gaining critical mass. "It's like a teenage party where everyone is waiting to see who else will go," explains Cochran. "You need enough buyers and sellers to make it a party."

Service providers take notice