FRAMING UP WAN Opportunities

By Tara Seals

In wide area networking, frame relay remains the largest embedded customer base. But, along with maintaining profitable businesses, carriers want to introduce new revenue-generating services while reducing backbone operational expenses via network convergence.

These forces are creating an interesting palette of opportunities in the frame relay market for the next few years.

Wholesale partners can stay one step ahead of the trends and enlarge their customer bases and average revenue per user by paying attention to efforts towards multi-service interworking, which is the ability of frame relay to deliver advanced services and interoperate with other technologies across an IP-based, multiprotocol label switching (MPLS) backbone.

With an installed base of more than a million and a half ports in the United States, frame relay represents a sizable chunk of existing business for many incumbent carriers and their service provider/reseller partners.

Operators have made large investments in the technology since the first port was introduced by WilTel Communications in 1992, to interconnect frame customers on large-scale SONET/SDH-based ATM backbones.

The downside is that frame is a circuit-switched technology that can’t speak IP natively, the language of new productivity-enhancing services.

That doesn’t seem to have killed the market, however.

“It’s not just a significant market - it’s huge,” says Erin Dunne, an analyst at Vertical Systems Group. “We’re not going to go anywhere fast. You’re talking about 1.5 million ports. While the IP VPN market is emerging, it’s kind of a blip. It’s dwarfed by the frame relay market in every respect.”

The U.S. frame relay and ATM markets are still growing, albeit at a slow pace. While the frame/ATM share of the whole data market will fall from 23 percent to 21 percent, The Yankee Group predicts the wholesale frame market will grow from $3.3 billion last year to $3.5 billion by 2008, while the ATM market will go from $527 million to $545 million.

Dunne notes revenue and the overall number of ports for frame is flattening, while bandwidth is increasing. “There are three growth areas in frame,” she says. “One is existing customers upgrading speeds. Two is in IP-enabled frame relay. And the third is in ILEC out-of-region deployments, stealing customers from AT&T and MCI. They zero in and offer better-faster-cheaper services.” As for existing customers, a recent Vertical Systems Group study found some enterprises are migrating toward emerging network technologies like IP VPNs and Ethernet, but the majority of frame relay sites remain unchanged.

Carriers back that up. “We went out and talked to customers about their three-to-five year network roadmap, and we found that 25 percent had no plans to migrate off frame relay,” says MCI’s Mike Marcellin, director of product marketing. “Typically the frame relay customers we have today have a long-term vision of IP, but maybe they want to move incrementally.

New customers may want to move onto our network, then think about the move to IP. The WAN market is fairly inertial.”

THE BACKDROP

While frame relay remains profitable and entrenched, IP services delivered on packet networks is the future. For instance, the increasing popularity of video streaming, VoIP and core IP-enabled business process applications like customer relationship management and ERP are increasingly driving the adoption of technologies like IP VPNs, which allow for a meshed architecture so one connection into an IP cloud per location is all it takes to support all these applications between all locations. In contrast, while frame can be IP-enabled to support enhanced services, every location must be connected to every other frame location in order for them all to talk to each other. A bank with 10 branches would need 100 permanent virtual circuits to be a meshed architecture. And there are bandwidth constraints:

A frame connection is still a frame connection, IP-enabled or not, and it tops out at DS3.

To support new, bandwidth-intensive, revenue-generating IP services that attract new customers and to carry the resulting traffic, carriers have invested in IP-based networks - networks that now need to start making money.

“For IP, the use is at 20 percent, and premium service is in the single digits,” says Mukesh Chatter, president and CEO at Axiowave Networks, which builds core and metro IP routers with a focus on delivering frame over IP MPLS. “For frame relay, it’s between 60 [percent] and 80 percent, with premium service making up 50 [percent]to 60 percent of that. So ATM and frame historically have been viable economically. So if someone wants to provide the IP VPN, it may be profitable, but it’s only a small part of the utilization, so the economics are challenging.”

Marcellin says MCI and its wholesale partners are in the process of encouraging the rapid migration of frame to its Private IP service, which runs on an IP, MPLS backbone.

“When they see what it can do for them from a cost savings and network management standpoint, and also the new IP applications, they get interested,” he says. “Take our MCI Advantage VoIP offer as one, for example. There are a lot of factors pushing customers towards MPLS.”

Nonetheless, many frame customers aren’t ready to move, and quality of service is one of the reasons. “Where the capex is going - IP MPLS - isn’t making money,” says Chatter. “For folks to migrate, they want the same or better service. They won’t leave their current SLAs behind and go for more unpredictable technologies. Unless the networks change and IP MPLS is backed by SLAs that are equal to or better than frame, it won’t happen.”

Quite a conundrum for carriers. Should providers require customers to leave frame relay behind and be ‘forklifted’ into newer technologies such as IP VPNs, a proposition that’s a bit like telling American drivers to junk their cars, regardless of their situations, because there’s a new kind of engine available? Doug O’Leary, the chairman of the Service Provider Council for the MPLS and Frame Relay Alliance, notes carriers must support the embedded frame customers, “while adding new customers, who may want to access the MPLS network with Ethernet or other technologies.” Not only is the cost associated with moving from a de facto standard to a new technology prohibitive for most companies, but there is still plenty of demand for the old standby. Carriers that won’t support frame customers risk losing them to providers that will.

So for now carriers maintain two networks, but change is underway in the carrier world, and wholesale customers need to be aware of it or risk losing valuable end-user opportunities. Namely, carriers won’t maintain separate networks forever. In fact, efforts are well underway to create access-neutral networks in which frame is one of many options for tapping into an MPLS core network. Regardless of access method, customers get the same services, quality guarantees, management options and bandwidth levels. In fact, even different locations within a company can have disparate access technologies to the same network, for any-to-any connectivity.

“There are so many access technology networks, frame relay being the largest,” explains World Wide Packets’ Barry Kantner, vice president of marketing. “There are separate ones for leased lines, packet, ATM … so what is quickly becoming an imperative for the carriers is to reduce operational expenditures by converging them, and MPLS is the choice to make that happen in the core.”

Meanwhile, “Equipment providers have to provide transparent interoperability with various edge access networks,” says Kantner. The MPLS and Frame Relay Alliance is working to solve many of the interworking issues, such as maintaining service level agreements and quality of service over MPLS that are inherent in frame relay.

While full, seamless interworking is in the future, there are solutions now for frame to interoperate with the MPLS network, so that carriers and their resellers can offer hybrid solutions to customers where some locations can be frame relay, and others can be connected by Ethernet or other access method.

IN THE FOREGROUND

A multi-access method world allows service providers and resellers to bring high-value IP services to existing frame customers, or to be applicable for the first time to a new set of customers previously sequestered by the use of frame, so service providers can widen their potential market share.

“There is $25 billion in frame/ATM business, and it’s not about to go anywhere quickly,” says Jim Guillet, assistant vice president of product marketing at Alcatel. “We have a product that takes the Ethernet traffic and puts it into a frame relay circuit. A bank with hundreds of branches with frame relay CPE may not want to change everything over at once. But now a service provider can come in with a solution to let them keep their equipment, but can offer an Ethernet circuit in the branches where the bank needs more bandwidth. Without this kind of ability, banks would have to upgrade everything to Ethernet to run certain applications, and that’s a tough business case.”

MCI and its wholesale customers can offer a secure interworking gateway that sits on the customer premise and allows frame relay customers to have remote access via an IP VPN. They can migrate to the VPN on a site-to-site basis, or user by user. It’s also managed securely, without taking the WAN off frame relay. “We want to make sure that customers on frame, as IP applications come down the pike, have access to as flexible a set of options as we can provide,” says Marcellin.

“Frame relay will be around into the future, but we need to present more options for IP so customers can move site-by site, or the whole network, easily, going forward.”

The whole issue of interoperability is anchored in end-user demand, says Global Crossing Ltd.’s chief marketing officer, Anthony Christie. “For end users there are triggers towards IP—, be that consolidation, a merger event, equipment that’s nearing the end of its lifecycle—, but you’ll have uneven migration towards a new MPLS backbone for a decade or more.

Smart operators know they have to continue to maintain multiple networks.

To reduce the total cost of ownership for end users, you must allow interoperability between them.”

Global Crossing has an MPLS core over a DWDM fiber layer, with services suites such as IP VPN and Internet access layered on top.

ATM/frame services are onramps to the MPLS network. It offers any-toany connectivity for wholesale customers, along with the UCommand self-service portal for self-provisioning, trouble ticketing, troubleshooting and other functions, available on a white-label basis.

“If you can only connect all sites on frame relay, you can’t maximize the utilization of bandwidth at each site,” says Mark Bieberich, program manager for communications network infrastructure at the Yankee Group. “A wider variety of access types gives customers a choice. Some enterprises might have storage area networking requirements that demand a high level of bandwidth best suitable for a GigE circuit. It’s far more economical than purchasing an ATM access loop. So bandwidth, cost constraints, applications affect the choices, and enterprises achieve a better value from their communications and they also can reduce operational complexity if they have options.”

New Edge Networks, which sells through resellers, integrators, service providers and agents, builds wide area networks for carriers and businesses that internetwork and blend diverse broadband access technologies. This enables customers to reduce the average cost per node, says CEO Dan Moffat. New Edge Networks intends to converge its ATM, frame relay and IP networks into a single core that is supported by a meshed MPLS engine.

Some say the move to multiservice networking is part of a bigger convergence opportunity for wholesale partners. “It becomes incumbent upon the service provider to provide multiple support and access options,” says Christie. “Half our business is wholesale, and youd better know what end users are doing. You have to have market intelligence. We talk to systems integrators and resellers and we tell them there are multiple layers of convergence.”

While IP convergence is simply a service architecture where all networking applications are managed and delivered on a single IP infrastructure, there are different levels of adoption, he says.

The integration of voice and data on one wide area network is one level, followed by LAN convergence, the use of applied services like unified messaging and convergence to one OSS/BSS operational fabric. “The proper engineering of the WAN and LAN helps with the delivery of voice, data, video and multimedia,” says Christie. “Service providers need to understand what’s happening there, otherwise you’re just selling dumb pipes.”

These high-margin services are the end game for resellers.

“Video has the ability to change everything because it requires so much bandwidth,” says Guillet. “So service providers need to adjust to major shifts in the service offering, to shift the business case and to truly enable these services.”

Service providers and resellers can use interworking for frame relay to gain market share and to get customers’ attention. If the carriers have anything to do with it, resellers could soon be faced with a gallery of new revenue opportunities.