The News: Ethernet obviously continues to make a name for itself as a high-speed flexible data service that service providers can deliver to businesses, but the advent of the Ethernet exchange in 2010 is focused on giving service providers a more efficient way to find interconnection partners for off-net opportunities.
While service providers have and will continue to strike individual External-Network to Network Interconnection (E-NNI) agreements with individual service provider partners when they have to deliver service to a business client that has
Born out of the Metro Ethernet Forum's work around, an Ethernet exchange is a neutral point where Ethernet service providers can connect to one or more other carriers at a common peering connection point.
Like any new market segment, the Ethernet exchange is not without its myriad of approaches. While it's possible other approaches could emerge, at this point there seems to be
- Exchange specific providers: Leading the built from the group up Ethernet exchange concept is CENX. Co-founded by Ethernet guru Nan Chen, CENX touts itself as a carrier, co-location, and data-center-neutral Carrier Ethernet Exchange service. As of November, CENX had over 15 ESL (Ethernet Service Locations) has been able to attract Ethernet talent include former AT&T Ethernet head Sandy Brown as president and Level 3 alum Russ Shriver as VP of marketing.
- Evolved entrants: Not long after CENX made its debut, traditional colocation and voice tandem providers such as Equinix (Nasdaq: EQIX), Neutral Tandem and Telx have also added Ethernet exchange service to their service portfolio. Seeing a potential global opportunity, Neutral Tandem expanded its fortunes by acquiring TiNET--a move that instantly gave the voice tandem services company international presence with established NNI agreements in place.
Despite the promise that the Ethernet exchange can bring to the Ethernet buying/selling market, it has a long way to go until it's a mainstream concept.
Right now, the dominant interest in joining the Ethernet exchange has come from competitive service providers like Cox Business, MegaPath and XO Communications (OTC BB: XOHO.OB). That's not to say that incumbents aren't interested in Ethernet exchanges, however. Already well connected incumbent service providers like China Telecom and even Verizon (NYSE: VZ) have joined CENX, for instance.
Of course, the other question is what about AT&T (NYSE: T)? Thus far, Ma Bell has remained mum on whether or not it will join an Ethernet exchange, although it continues to expand its Ethernet presence domestically and globally through established E-NNIs.
And while Vertical Systems Group forecasts the Ethernet exchange market will be worth US$674 million in 2014, Rosemary Cochran, principal of the analyst firm, is quick to add that it will take a few more years for Ethernet exchanges to expand worldwide and the business model to stabilize.
"The providers we've talked to in our survey all over the world are split--half of them say, 'yes, we're going to use it in the next two years,' and about half of them say, 'we're not sure,'" she said.
What's significant about it?: Admittedly, the Ethernet exchange market is still very much a Wild Wild West with a host of new players, but for service providers that are looking for another way to expand their off-net Ethernet reach the Ethernet exchange will be another tool in the veritable toolbox to streamline the Ethernet interconnection process.