Enterprise Ethernet Enterprise Ethernet Services:Services:

Is there a Business Is there a Business case? case?

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Rolando Oliver

VP IP Support and Tec. Mktng.

Europe & South

Rolando.oliver@alcatel.com

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Our talk today…

• Ethernet Interfaces have become the technology of choice for Services today– They support both Ethernet Generic Services, such as VPLS,

and IP-VPNs

• Many changes in the industry affect the Business case for Incumbents and Alternate Providers alike– The impact is at different levels in the Capex, Opex, and

Revenue

• We will discuss:– The technology evolution– 3Play and its impact in Capex and Opex– The Evolution of Demand for Ethernet based services

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Ethernet: Transforming Itself

Bob Metcalf’sFirst design

• Others come and go!… Ethernet thrives!• 300 million Ethernet ports installed• 802.3.XX Standards are impressive (so many that they are double letters now)

• Coax, copper, fiber, SONET/SDH, Wireless, 10MB,100MB, 1000MB, 10000MB, ?

• Others come and go!… Ethernet thrives!• 300 million Ethernet ports installed• 802.3.XX Standards are impressive (so many that they are double letters now)

• Coax, copper, fiber, SONET/SDH, Wireless, 10MB,100MB, 1000MB, 10000MB, ?

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MPLS and Ethernet

• Scalability• Restoration• QoS• Manageability

COAX COAX Enterprise & CampusHUBHUB

BRIDGEBRIDGESWITCSWITCHH

MPLMPLSS

Residential, Enterprise, Carrier & WAN

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IP Video is a Strategic Priority for our customers

No question, Video services offer the most significant ARPU growth potential for our customers.

• New revenue from new services

• Customer loyalty through bundling

• Long term growth potential from yet to be identified new services

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Triple-Play Network Architecture: Basis for Business

BSA = Broadband Service Aggregator

BSR = Broadband Service Router

BSABSA

BSA

IP

BSA

NGN

Internet

Video

Network Management

VPLS

IP DSLAM

5750 SSC

Subscriber Services Control

BSR

BSA = Broadband Service Aggregator

BSR = Broadband Service Router

BSABSA

BSA

IP

BSA

NGN

Internet

Video

Network Management

VPLS

IP DSLAM

5750 SSC

Subscriber Services Control

BSR

BSA = Broadband Service Aggregator

BSR = Broadband Service Router

BSABSA

BSA

IP

BSA

NGN

Internet

Video

Network Management

VPLS

IP DSLAM

5750 SSC

Subscriber Services Control

BSR

3Play Requirements are also Business Requirements:

• Q o S• Reliability• Scalability• Manageability• Capacity

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Facilities are the Single Highest Services Cost!

Leased Line

Other Costs

Customer Acquisition

Fulfill OrdersService

Assurance

Facilities and Settlements

LAN

Other Costs

Customer Acquisition

Fulfill Orders

Service Assurance

Facilities and Settlements

Frame Relay

Other Costs

Customer Acquisition

Fulfill Orders

Service Assurance

Facilities and

Settlements

Costs mainly related to the Facilities:Mainly Access!

Costs mainly related to the Facilities:Mainly Access!

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There is a migration over time: low speed FR -> Broadband DSL, High Speed FR and ATM -> Ethernet Fibre links

Convergence: New Scenario for Data Services

Data Services have been considered “Special” Different Bandwidth Different reliability

Transport and Access overlay networks have been built Economies of scale were often doubtful Specialized A to Z organizations were created 3Play changes this landscape for the first time Services developed for residential (Broadband) are also

attractive for Business

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Enterprises Have Targeted Ethernet

RHK Enterprise Business Study (2005)

Key Results: Why Choose Ethernet?

The four most important decision factors are:WAN Bandwidth requirements continue to increase

WAN Ethernet can help reduce IT costs

End users are willing to increase WAN services spend IF total IT spend can be reduced

WAN Ethernet is supporting enterprise-wide applications

BANDWIDTH IS THE NAME OF THE GAME: this is the definite advantage of Ethernet!

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World Wide Shift Towards Ethernet: Drives

Carrier Revenues from traditional data services over separate infrastructures are eroding

Service providers want to deliver a richer set of services and scalable bandwidth over more efficient network to maximize revenue and profit potential, and to ensure competitiveness

Enterprises want to better control telecom expenditures and roll out new applications by leveraging more cost-effective communications technologies

Enterprises want more flexible communications infrastructures to face uncertain market conditionsHEAVY READING

Carrier Ethernet Equipment Market OutlookAugust 2005

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Putting it all together

• There are many possible Business cases• Most important conditions influencing the business case

are:– Incumbency– Regulation (strong regulatory environment, unbundling, co-location,

etc)– Legacy Services Presence (how developed is the existing services

structure, how ready are the customers to up-grade, etc)– Demography (how planned are the urban agglomerations, centralized

business sectors, etc)– Competitive environment (how well established or how well endowed

is competition)– Business strategy

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Business Case Parameters: Revenue

• Demand for Ethernet services (generic services, IP-VPNs with Ethernet access) is clear and strong – Strong demand for more Bandwidth– Customers are willing to pay, but they want more price

performance: they want to do much more with little more• Strong demand for VPNs (IP, Ethernet)

– Market wants the flexibility of Ethernet interfaces: agile adaptation to a changing environment => Ethernet is particularly well suited

• There is a challenge for operators to execute well:– The incumbents must transition and keep their market share

coming from legacy as they do so– The alternate provider must select the right markets and prove

agility and imagination when developing services

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Business Case Parameters: Capex

• Technology to build Ethernet based IP infrastructures is mature and more economical than other alternatives– Economies of scale have shifted to Ethernet technology (cost of

interfaces, applicability to enterprise, residential, carrier)– 3Play is pushing even more the Ethernet learning curve (QoS,

Carrier Class, Scalability)

• For the incumbent the possibility is to share CAPEX with 3Play, DSL Inter-working for Business and Residential

• For the alternate provider technology is there to assist in selecting niches for agile and targeted deployment

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Business Case Parameters: Opex

• Technology is there to reduce OPEX for Business Services either by sharing with residential (3Play) or by allowing targeted and agile deployments for Alternate Service Providers– For incumbents

• 3Play allow for convergence• Virtualization allows for VPNs for Business and Residential• Difference between Residential and Business is blurring

especially at lower speeds• All this increases the Economies of Scale for Operators

– For Alternate Providers• Ethernet reduces the number of different interfaces required• Get advantages from the Ethernet infrastructure deployed

by the incumbents• Can pack more services in a single access

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Conclusion

• Ethernet MPLS based networks are the clear choice for Service Providers for Ethernet Generic Services or IP-VPNs– Technology is the norm for 3Play

• Brings substantial Sharing and learning curve benefits

– Clear Economies of scale from Enterprise interface volumes

• Definite advantages both for Incumbents and Alternate Providers– Clear demand for Ethernet based VPNs

– Reduced Capex from sharing and mature technology

– Reduced Opex from sharing with 3Play and Ethernet granular interfaces

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