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Marketing Brief

Intelligent Ethernet Demarcation with

Zero-touch provisioning:

Enabling Service Creation with quick ROI

Version 1.0

Copyright 2012 MRV Communications, Inc. All rights reserved.

This document contains proprietary information and is

confidential. Its contents shall not be disclosed or reproduced in

whole or in part.


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Empowering the Optical Edge

MRV-OCS Ethernet ROI Marketing Brief Page 2

AbstractEthernet has been playing a strategic role and is seen as the transport technology of choice as carriers

and wholesale providers open their optical Ethernet networks to the revenue promise of next-

generation packet services. Low cost, simplicity, bandwidth scalability & granularity and ubiquity are

among the key attributes of the compelling value proposition that Ethernet provides.

Carriers investment in Carrier Ethernet is growing rapidly. Infonetics Research estimates Carrier

Ethernet revenue will grow to $32.3B by 2014, driven chiefly by the move to IP NGN packet networks

and growing traffic from consumer, business and Ethernet mobile backhaul networks.

While carriers are rapidly adopting Ethernet as preferred service, a survey conducted by IDC and

Enterprise CIOs shows that the providers key challenge is delivering and supporting services.

Service visibility and service delivery assurance is essential. Comprehensive service provisioning and

performance management are important competitive advantage in todays market.

This paper outlines how the new paradigm of Ethernet flexibility enables service oriented selling,

combined with incremental revenue generation from tiered SLAs at reduced operating and

equipment costs. It also outlines how carriers and wholesale providers can benefits from the Ethernet

economics and plethora of functionality that Intelligent Ethernet demarcation provides for delivering

business Ethernet and Ethernet-based Mobile backhaul services with quick ROI.

Business Ethernet Services

Carrier Ethernet business services are a lucrative segment enjoying a phenomenal growth and strong

demand. This demand is fueled by lower transport cost per Mbps and speeds up to 10Gbps and

above. This in turn is creating demand from enterprises and for cloud-based service providers as well

as traditional telecommunications companies.

The sharp increase in IP traffic is driven by new applications such as business data and data

replication, video conferencing, online trading, content distribution networks, and point of saleplatforms. From their end, carriers see an opportunity to enhance their portfolio with next-generation

services with a lower Total Cost of Ownership while combining enhanced user value with sustainable

revenue potential.

Market researches provide the numbers to support such claims. Vertical Systems Group, for example,

believes that the total worldwide market for business Ethernet services between 2009 and 2014 will

exceed $162 billion, declaring such services the fastest growing strategic data product for service

providers throughout the world. (Vertical Systems Group: Worldwide Business Ethernet Market

Update, 2011).

Carrier Ethernet business services are now available from incumbent carriers, competitive providers,

cable MSOs, and wholesale providers worldwide.

Ethernet Mobile Backhaul ServicesMobile operators and backhaul transport providers are adopting IP/Ethernet backhaul as the

technology of choice to cost effectively scale instead of relying on existing TDM-based transport

networks for Mobile backhaul for the following reasons:

Ethernet presents the most scalable cost-effective transport solution and it offers simplicity andflexibility

Ethernet is a future-proof RAN (Radio Access Network) transport technology (3G, 4G/LTW, andWiMax backhaul)

Ethernet can be extended to the cell-site over various low-cost and ubiquitous technologies(xDSL, PON, WiMAX, xWDM, Ethernet-based radios and HFC)

Ethernet opens up wholesale opportunities


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Key Market Trends

The following graphs displays key findings from recent market research conducted by Infonetics

Research (Worldwide Mobile Backhaul Installed Connections by Technology) and Heavy Reading

(Global Rate of Adoption of Ethernet Backhaul) that illustrate the rationale for the transition to

Ethernet-based mobile backhaul solutions.

Source: Infonetics Research, May 2011

Source: Heavy Readings Ethernet Backhaul Quarterly Tracker, July 2011


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The Economics of Ethernet for Mobile Backhaul

To prepare for the high-bandwidth usage, even for 3Gs HSPA+, mobile operators are moving from

TDM to packet networks for backhaul connectivity. Typically new backhaul networks use Ethernet

because the associated costs are well under half of costs for comparable TDM approaches. As celltower bandwidth requirements increase savings are even greater. By transitioning from TDM to

Ethernet, the reduction in monthly recurring charges paid to backhaul transport providers for wireline

backhaul means dramatic savings as yearly capacities increase (see figure below).

Source: Infonetics Research, Mobile Backhaul Equipment and Service Biannual Worldwide and Regional Market

Share, Size and Forecasts, November 2010

The following 500-node network analysis illustrates the economics of Ethernet-based mobile

backhaul.

10 Mbps or equivalent to

500 sites

Backhaul cost per

month: one site

Backhaul cost per

month: 500 sites

Backhaul cost per year:

500 sites

7 T1s at $300

per month per T1

$2,100 $1,050,000 $12,600,000

10M Ethernet at

$75 per month per T1

$750 $375,000 $4,500,000

10M Ethernet at

$40 per month per T1

$400 $200,000 $2,400,000

Source: Yankee Group; prices may vary by region

For a 500-node network Ethernet saves the

Mobile Operator between 65% and 80% in bandwidth costs per year.


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The Benefits of Multiple Classes of Service for Ethernet Mobile BackhaulAs discussed above, Mobile Operators are transitioning their networks from TDM to Ethernet-based

backhaul. Instead of leasing E1s/ T1s, the Mobile Operator leases Ethernet Virtual Connections (EVCs)

from the Access Provider. In the vast majority of cases, these EVCs are running a single, highest Class

of Service (CoS). This arrangement has come about primarily for operational simplicity. If the EVCbehaves exactly like an E1/T1 but just with higher bandwidth, then the modifications to the Mobile

Operators networks, SLAs, OSSs and processes are minimized and they can more quickly get the

solution to market.

The Metro Ethernet Forum (MEF) has recently authored a positioning paper (as part of the recently

announced MEF CE 2.0 Initiative) with an analysis showing (see below illustrative network diagram)

that the use of Multi-CoS EVCs for mobile backhaul is a superior practice when compared with the

Single-CoS EVCs along with its a viability and expediency. MEF concluded that:

Multi-CoS mobile backhaul results in substantial cost savings for both the Mobile Operator andthe Access Provider

When implemented correctly, this lower cost Multi-CoS solution will result in equivalent or betterquality (as experienced by the Mobile Subscriber) than the Single-CoS solution

The main challenge of Multi-CoS backhaul is increased operational complexity. But the difficultyof overcoming this challenge is justified in a large majority of cases. Emerging industry standards,

especially MEF 22.1 and MEF 23.1 will guide operators on how to implement Multi-CoS mobile

backhaul to help minimize this complexity

Source: Source: MEF, February 2012Prioritizing Traffic (1 - Network control, 2 - Interactive voice, video, 3 Signaling, 4 - Internet data,

business data, streamed video)

Multiple CoS id part of the recently announced MEF CE 2.0 Initiative.

Bringing CapEx and OpEx into Balance

One of the major challenges that service providers are facing as they consider upgrading to advancedservices is how much they are willing to invest in intelligent Ethernet Demarcation. On the one hand,

they will have to deploy thousands of these devices in different types of locations.

On the other, if they intend to offer sophisticated differentiated retail or wholesale services they need

to keep close control of their OpEx and service costs because ultimately Ethernet is an inexpensive

service per Megabit of bandwidth. So ideally they will balance modest CapEx increases with greater

revenue opportunities and lower OpEx.

Multiple CoS creates intelligent MBH network with great rewards

including 25% + savings for Mobile Operators


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Service Positioning Strategies and OfferingsService providers are exploring strategies to address their need to create value in light of price

erosion in mature, highly competitive markets. One of the strategies they are exploring is based on

service differentiators.

Service differentiators can cover a variety of aspects such as SLA guarantees, resiliency, service portals

or application based QoS. When enterprises are able to select the service combination that best suits

their needs, service providers can justify higher margins and differentiate their offerings from the

competition. Service providers can offer a broad range of choices, including scalable bandwidth from

low to super high rates, a variety of QoS and SLA levels, resilience and restoration options and

connectivity topologies. This allows them to present a rich portfolio that provides future upgrade

opportunities and a better chance of meeting the enterprises long-term objectives.

Service differentiators with sample attributes:

Multi-tier QoS: from single level to 4 levels or more Security: from VLAN separation to data encryption SLA Monitoring & Reporting: from no reports to self-managed web-based customer portal Restoration options, 1:1, 1:n, diversely routed fiber or copperIntelligent Ethernet Demarcation - Enabling Services with Revenue GenerationIntelligent Ethernet demarcation devices are known to provide significant operational savings to

service providers offering business Ethernet services and Ethernet Mobile Backhaul services. These

demarcation devices define the service boundary and establish end-to-end OAM (Operation,

Administration, and Maintenance) functionality that supports loopback testing from existing test sets,

remote fault isolation and end-to-end service management. This feature-set translates to a number of

proven benefits to service providers: reduced technician on-site operations and time to repair, fewer

test sets required in the field, end-to-end service visibility, and ultimately, higher reliability and better

QoS. The net result is reduced OpEx & CapEx and an overall increase in operational efficiency.

Strategically installed at service end-points, intelligent Ethernet demarcation devices are ideally

located to establish revenue-driving Ethernet services backed by assured SLAs.

Independent of the service providers network topology, Ethernet demarcation devices can now map

Ethernet services over multi-vendor, multi-carrier and multi-technology networks, and provide

advanced per-flow QoS with advanced traffic management capabilities such as rate limiting and

shaping. Complementing these service creation capabilities, advanced service assurance functionality

allows carriers to use a Ethernet demarcation devices built-in traffic generation and analysis

functionality to turn up new services, then continuously monitor SLA performance using testing

techniques.

Intelligent Ethernet demarcation devices allow service providers to profit from accelerated serviceroll-out, reduced spending on network elements, and the ability to offer premium SLA-backed


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services. As such, these intelligent devices have established a valuable role in revenue generation,

enabling efficient, accelerated, large-scale deployment of packet-based services and the applications

they enable in demanding business services and Ethernet mobile backhaul applications.

Two key functions now available in intelligent Ethernet demarcation devices act as catalysts for new,

revenue streams for service providers: service creation functionality and remote zero-touch

provisioning.

Creating New ServicesCarrier Ethernet services not only present new revenue opportunities but also differentiates the

service providers from their competition. Creating differentiated service requires activation and

testing the service end-to-end. Service providers must ensure services are provisioned, configured (E-

Line/E-LAN) and proper service turn-up testing procedures are executed. In addition to the existing

business services such as Ethernet Private Line (EVL), Ethernet Virtual Private LAN (EVPL) and Internet

access service providers can offer differentiated premium value-added SLA services. Service creation

is also important for the rapid deployment of next-generation business and consumer applications

such as IPTV, video on demand (VOD), Voice over IP, mobile video conferencing, real-time gaming and

more.

Enabling Service Oriented Selling with OptiSwitch 900/9000 Series and Pro-

Vision Service Provisioning System

MRV's OptiSwitch family is an award-winning solution comprises of compact Carrier Ethernet

demarcation and 1st mile aggregation platforms that range from the OptiSwitch OS900 intelligentEthernet demarcation portfolio to the OS9000 Carrier Ethernet packet-optical aggregation product

line.

OptiSwitch products offer service providers a full suite of carrier-grade Ethernet services along with

high-availability, Hierarchical Quality of Service (H-QoS) for dynamic bandwidth management, multi-

stage scheduling, policing for global Ethernet Network-to-Network services, security, Ethernet

operation, administration and maintenance (OAM) support, and TDM circuit emulation services. This

full suite of hardware-based and multi-layer OAM features & tools creates flexible service awareness

and rigid SLAs. OptiSwitch products meet IEEE, ITU, IETF standards and MEF specifications, offering

complete control to simplify deployment and management while maintaining full interoperability and

visibility into customer and provider networks. OptiSwitch is fully compliant with the MEF Carrier

Ethernet 2.0 (CE 2.0) initiative that will enable service providers to transform their metro networks fora wide range of next-generation services including mobile backhaul to support the growing 4G and

LTE networks.

Study conducted by Heavy reading reveals that there are about 500 different

Ethernet services being offered by over 200 Carriers in the U.S. alone.

The rich feature-set & capabilities of MRVs Carrier Ethernet Access solution

form a service enabler solution for the service providers customers.

MRVs Pro-Vision service provisioning and management system combined with the

powerful OptiSwitch Carrier Ethernet Access solution further enriches the OptiSwitch CE

2.0 solution by enabling service creation with zero-touch mass deployment with rapid

service turn-up and consequently reduces OpEx and secures service providers investment.

It provides complete visibility of service performance and automated SLA monitoring.


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Carriers can charge their customers by service category & offerings as outlined below:

Chargeable protected services with redundancy schemes(e.g. mission critical applications, health, banking, etc.):

o Link Aggregationo Ring Protection (ERPS G.8032)

QoS (guarantee voice, video and online trading)o Platinum, Gold, Silver, Bronzeo Guarantees by traffic typeo Guarantees by traffic type and bandwidths

OAM tools enable carriers to ensure measure, monitor and ensure strict SLA offering to theircustomers:

o SLA performance metricso Delay, Delay Variation

VLAN (traffic separation for security, traffic separation so different departments or applicationscan allocated bandwidth or other QoS treatment)

o VLAN by departmento VLAN by geography (per remote branch)o S-VLAN for aggregation of multiple customer VLANs for transport across the WAN

MAC addresses per VPN (charge base on the number of devices or users on the network and perdepartment and location)

o Number of MAC addresses of customer devices

The combination of simplicity, bandwidth scalability & granularity, and

ubiquity of Ethernet along with the compelling OptiSwitch value proposition

creates the foundation for service creation and consequently enable carriers

to generate increased revenue and higher margins.


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Additionally, the rich feature-set of the OptiSwitch series enables service providers to generate

revenues from Tiered SLA as described belowby defining SLA and performance packages as outlined

below:

$xxxx Platinum Business Class low latency $xxx Gold $xx Silver $x Bronze

OpEx Reduction with OAM Tools

Current Costswithout Intelligent Demarcation Forecasted CostsWith MRV's OptiSwitch

Intelligent Ethernet Demarcation Solution

Cause of

outage

Percentage of

outage

Site visits per

year

Site visits

reduction with

intelligent

demarcation

Site visits per

year with

intelligent

demarcation

Net

improvement

Equipment 45% 0.9 80% 0.18 36%

Fiber/Copper

cable

5% 0.6 80% 0.02 4%

Power 30% 0.1 80% 0.12 24%

Provisioning 10% 0.2 95% 0.01 10%

No problem

found

10% 0.2 95% 0.01 10%

2 0.34 84%

Source: MRVs information collected from multiple service providers in various regions worldwide

Average cost per site visit $300

Current yearly site visits cost without demarcation $600

Expected yearly site visits cost with demarcation $102

-------

Yearly savings per single customer $498

Yearly savings per metro network with 1,000 demarc devices $498,000

SLA rebate savings Contract dependent

OptiSwitch Series provides comprehensive and hardware-based OAM tools that

enable OpEx savings with SLA rebates savings as outlined in the table below.

OptiSwitch comprehensive OAM tools provide reduction in number of site visits that results

in annual savings per customer and consequently reduces OpEx.


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Zero-touch provisioningKey for OpEx Reduction

MRVs Pro-Vision is a carrier-class service provisioning and management platform that offers service

providers a wide range of applications and tools to fully manage and control large-scale MEF

compliant Carrier Ethernet based voice, data and video services. The GUI-based software platformallows service provisioning, monitoring and troubleshooting from an easy-to-use, central network

management application. Pro-Vision complements MRVs industry leading MEF compliant Op tiSwitch

900 series of intelligent demarcation devices and OptiSwitch 9000 Carrier Ethernet packet-optical

aggregation platforms. The software provides the ability to pre-define individual service profile

components that can be used to easily build new service offerings and reduce time to revenue.

Pro-Vision state-of-the-art feature set includes rapid service creation, powerful performance

monitoring and network health checking, including real-time performance metrics, port and EVC

utilization, transmission errors and QoS thresholds with historical reporting that can be exported. Pro-

Vision offers Web based Customer Portal that allows monitor real-time service performance and SLA

verification based on the customers view. The customer Web-based Portal provides dashboard view

allows monitor real-time service status, service delay SLA, bandwidth utilization and quality of service

parameters such as availability, delay, jitter, throughput, packet loss and service level alarms.

Customers can view the standardized performance management test results from their web browser.

Pro-Vision supports zero-touch mass deployment along carrier-class scalability and high-availability.

Pro-vision zero touch offline service persistence provides the flexibility and cost savings from

provisioning in offline mode without any need for physical network elements. In addition the zero

touch capability allows automatic download of device startup configuration, regional maps, batch

upgrade and scheduled backup procedures.

MRVs Pro-Vision Service Provisioning and SLA Monitorin

Automatic Zero-touch remote turn up process minimizes technician on-site operations and

simplifies device installation and turn-up. It allows auto download of up-to-date device

software and firmware versions, device configurations and database synchronization.


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TCO Analysis for operating a Carrier Ethernet Network with Service Provisioning

The Total Cost of Ownership analysis hereunder provides some numbers that demonstrate how Pro-

Vision can provide operational savings when operating a Carrier Ethernet Network.

Most TCO models have the same basic high-level elements of measurement categories: direct

(software, hardware, operations, and administration) and Indirect (downtime and end-user

operations) costs.

Nevertheless, carrying out a TCO exercise typically demonstrates that the true costs of IT, specifically

desktop are, on average, 5 times more than the costs of acquisition. Most of this cost is attributed,

not to technology, but to ongoing service management processes.

In the following analysis the TOC was divided into 3 groups which seem to be important to carriers:

acquisition cost of the product (software, hardware, and installation), maintenance cost of product

(operations, support, and downtime), and service related indirect costs (scalability, customization,

end-user operations, and shelf life - easy-to-use service creation environment that allows for rapid

development of new services).

Number of CE network devices 1000

CE elements growth annual 10%

Number of CE devices upgrades 40%

Number of CE services provisioned per day 50

Number of faults processed per day 20

Number of inventory discovery transactions per day 100

Number of SLA verificaiton transactions per day 10

Number of security and audit trials per day 150

Number of service trouble truck rolls per day 3

Cost per trouble truck roll (Labor only) 226

Loaded cost per employee per year $100,000

Hourly Loaded cost Technical personal $28

Number of customer care staff (annual) 20

Number of customers 50

Current annual churn rate 4%

Cost to acquire a new customer $10,000

The table below outlines the working assumptions for the TCO analysis they are

based on accumulated data from ongoing discussions with MRVs customers and partners

in different regions worldwide.


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MRV conducted a 3-year TCO Analysis based on the above working assumptions (direct and indirect

costs) and the Pro-Vision product survey findings. The major highlights are outlined below:

The aggregated direct and indirect cost benefits were $126,000 and $3,681,970respectively => total cost benefit of $126,000 + $3,681,970 = $4,807,970

Aggregated CapEx: $1,050,000 Aggregated OpEx: $175,054 Total savings = Total cost benefit aggregated (CapEx + OpEx) =

$4,807,970 ($1,050,000 + $175,054) = $4,807,970 - $1,225054 = $2,582,925

Payback period = 1.4 years Annual ROI = 73%

The in-depth TCO analysis can be obtained by sending an email [email protected]

and specifying Pro-Vision TCO Analysis in the Subject field.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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SummaryThe carrier Ethernet equipment market continues to grow, having reached $12.7 billion in 2010 and

forecasted to reach $32.3B by 2014.

Service providers are exploring strategies to address their need to create value in light of price

erosion in mature, highly competitive markets. One of the strategies they are exploring is based onservice differentiators.

A key benefit of Intelligent Ethernet Demarcation is the ability to enable and accelerate the revenue

generation of carrier-grade Ethernet services. Two key functions now available in Ethernet

demarcation act as catalysts for new, high-margin revenue streams for service providers: service

creation functionality and automated, remote zero-touch provisioning. Other intelligent Ethernet

demarcation capabilities such as rich OAM feature-set that ensures strict SLA offering help service

providers to reduce OpEx and CapEx.

Intelligent Ethernet demarcation provides reliability, scalability, flexibility, and manageability

capabilities that create customer benefits and consequently enable chargeable services with quick

ROI.

MRVs OptiSwitch Intelligent Ethernet demarcation Series enable service oriented selling combined

with incremental revenue generation from tiered SLAs at reduced operating and equipment costs,

and allows service providers to benefit from the economics and plethora of functionality that

Intelligent Ethernet Demarcation provides for the delivery of business Ethernet and Mobile Ethernet

backhaul services with quick ROI.

MRVs Pro-Vision service provisioning and management system reduces TCO and lowers the cost of

operating a Carrier Ethernet network. This goes hand-in-hand with increasing carriers revenues by

creating premium services. Additionally, Pro-Vision provides plug-and go zero-touch remote

provisioning that eliminates the truck-roll to provision, saves time in fault identification, and cuts

network trouble shooting. The total cost of operation is every carriers bottom line and consequently

carriers need to be sharp to win against their competitors.

Pro-Vision offers Web based Customer Portal that allows monitor real-time service performance and

SLA verification based on the customers view. The Customer Portal functionality translates to huge

benefits that allow carriers to create rich services without too much development effort and truly

differentiate themselves in the market.

Hereunder is a list of key quantitative findings that derived from operating a Carrier Ethernet network

with zero-touch provision outlines:

For a 500-node Mobile Backhaul network Ethernet saves the Mobile Operator between 65% and80% in bandwidth costs per year (page 4)

Multiple CoS creates intelligent MBH network with great rewards including 25% + savings forMobile Operators page 5

$498,000 yearly savings for a metro network with 1,000 demarc devicesWith SLA rebate savings (contract dependent) page 9OptiSwitch comprehensive OAM tools provide reduction in number of site visits that results in

annual savings per customer and consequently reduces OpEx

A 3-year Pro-Vision TCO Analysis revealed the following findings:

The aggregated direct and indirect cost benefits were $126,000 and $3,681,970respectively => total cost benefit of $126,000 + $3,681,970 = $4,807,970

Aggregated CapEx: $1,050,000 Aggregated OpEx: $175,054 Total savings = Total cost benefit aggregated (CapEx + OpEx) =

$4,807,970 ($1,050,000 + $175,054) = $4,807,970 - $1,225054 = $2,582,925

Payback period = 1.4 years Annual ROI = 73%


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About MRV CommunicationsThe Optical Communications Systems division of MRV Communications is a global provider of Carrier

Ethernet, WDM transport and infrastructure management solutions since 1988. MRV products

enable the delivery of next-generation optical transport and Carrier Ethernet services over any fiber

infrastructure. Since its inception, MRV has demonstrated expertise and experience offeringinnovative products that address future challenges while reducing network complexity and costs.

MRV solutions are deployed in prominent worldwide networks of multinational service providers,

wireless operators, cable MSOs and mission-critical enterprises in government, finance, military,

transportation and utility sectors.

MRV delivers a continuous stream of innovative technologies and has won numerous technological

awards for its products. MRVs global infrastructure includes R&D centers in North America and

Europe, along with support centers, and sales offices around the world.

Documents

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