When I look at the emergence of the Ethernet exchanges--the latest being Telx's Ethernet Exchange--I am reminded of the bandwidth trading dream I followed in my first article 10 years ago for the former Telecommunications Magazine called "Commoditizing Global Bandwidth." That market opportunity, if you remember, had been met with a ton of hype and false promise by not only a host of pioneering bandwidth brokers (Min-X) and clearinghouses (Arbinet), but also the once-mighty and now disgraced Enron Communications.
And while the jury is still out on what Ethernet exchange providers will survive, I think what's a bit different is that the Ethernet exchange's purpose is a bit more focused.
Although service providers have and will continue to carve out interconnection and External Network to Network Interconnection (E-NNI) arrangements with other carriers, the idea behind the Ethernet exchange is to simplify the process by providing a central station where service providers can connect at a common peering connection point.
Traditionally, service providers that needed to expand their Ethernet footprint out of region had to establish various one-on-one pre-standard E-NNI or interconnection arrangements with other carriers. Alternatively, the Ethernet exchange allows service providers to choose from a number of carriers to expand their footprint from one central location.
The other side benefit for a carrier that joins an Ethernet exchange is that the service provider can also increase its own revenue potential by making its service available to other Ethernet players.
Of course, like the bandwidth traders, the emerging Ethernet exchange operators are coming at the problem from somewhat different angles.
On one hand there's Nan Chen and his company CENX. CENX's idea is that the Ethernet exchange should not only provide a connection, but value-added services including service management.
Then, there's the data center/interconnection providers such as Equinix, Neutral Tandem, and Telx that have decided to expand their reach. Already providing other service providers interconnection services and related neutral facilities to house equipment, a mix that includes a big portion of Ethernet, the colocation provider's movement into the Ethernet exchange market is a natural extension of the services they already provide.
Not surprisingly, CENX, which just announced that it reaches 10 million service locations, believes he has an advantage over the colocation providers.
"The colocation guys that want to be in this space; their view is if provider A and provider B want to connect, we can connect A and B together virtually, and after that you work out what you want to do," said Nan Chen, President and CEO of CENX. "We do that for sure, but the most important thing for us is we take a great deal of pain from the service provider and tools to do search, quotes, order the services, monitors the services and integrate their IP systems with us to make things a lot more seamless."
Regardless of the approach, a growing number of incumbent (Verizon) and even competitive service providers (Covad, RCN Metro, Transtelco, US Signal) that provide Ethernet services have embraced the concept as one of several Ethernet market expansion tools.
Eric Bozich, Vice President, Qwest Product Management, which just launched an expanded Ethernet over Copper service for both in-region and out-of-region business customers, while not revealing any formal relationships, sees the value of the Ethernet exchange.
"We're pontificating in some Ethernet exchanges in and outside of our region," he said. "I think that's important ingredient to facilitate connecting data suppliers with data consumers, and doing that the most efficient way possible."
Bozich is right. At the end of the day, the value of the Ethernet exchange should be seen as another tool in the service provider's veritable toolkit to provide quality service to the customer in a timely manner.--Sean