Getting Gig-E With It: Bells Looking at Next-Gen MAN Services

Posted: 11/2001

Wholesale Channel

Getting Gig-E With It: Bells Looking at Next-Gen MAN Services

By Josh Long

The Baby Bells aren’t known around the telecom block for being the most responsive or cheapest provider of transport services in U.S. cities, compared with next-generation competitors such as Yipes Communications Inc., Telseon and other Ethernet-based wunderkind.

But, gradually, that is changing.

Without cannibalizing its bread-and-butter SONET-based revenue, the Bells are starting to integrate the cost-effective transport protocol into their metro networks. What’s more, the RBOCs have begun to kick their provisioning engines into higher gear — slashing the number of days it takes to procure a local circuit — and have gained FCC approval to negotiate prices in U.S. cities with companies on a one-on-one basis.

The Bells are introducing Ethernet services in their retail operations, and it is just a matter of time before the companies extend Ethernet capabilities to wholesale customers — perhaps within the next year or two, according to some technology analysts and industry executives.

SBC Communications Inc., Verizon Communications and Qwest
Communications International Inc. all declined to comment for this story. BellSouth Corp. executives, however, say they anticipate offering a gigabit Ethernet service to wholesale customers in the second half of 2002, but say it will not replace the company’s core SONET-based transport packages.

SONET is the protocol that was born and bred in the 1980s to carry voice traffic. However, critics say it is an inferior language in the Internet world.

“We are very interested in [gigabit Ethernet] and working hard to try to develop that but on the same token we think it will be a complement to the existing suite of services,” says Elliott Bryant, senior director of product marketing of wholesale, BellSouth. “It is very early in the game.”

Joe Lardieri, director of data solutions at BellSouth, says the newer companies that are delivering Ethernet-based metropolitan area networks to enterprise customers are providing a valuable service, but he adds, “We will never force customers to say this is the only technology available.”

Ethernet is the protocol of choice in local area networks (LAN) throughout the country and is proving to be a cheaper way to carry and terminate huge volumes of data traffic in metro networks than through SONET. Gigabit Ethernet also makes it possible to offer bandwidth on demand.

So what’s the hold up? BellSouth’s Bryant contends many vendors have yet to develop all the Ethernet hardware that will integrate into the Bells’ operating support systems (OSS). Depending on the technology, it can take between six months and a year to integrate a vendor’s product into the Bells’ OSS infrastructure, says Jeffrey Saadeh, executive director of network element provider OSS solutions at Telcordia Technologies Inc., which provides most of the OSS systems that run the Bell networks. The products complete Telcordia’s OSMINE (operations systems modification of intelligent network) process for OSS interoperability.

That may be changing too. Analysts say a new group of products known as multiservice provisioning platforms have allowed incumbent carriers to offer Ethernet-based services over their SONET infrastructure. Research firm IDC says the multiservice provisioning platforms incorporate the functions of multiple network elements — including SONET multiplexers, DWDM terminals, distributed digital cross connects, Layer 2 switches and IP routers — in a single box.

IDC research analyst Sterling Perrin says his firm is confident the incumbents will migrate to the technology even in an economic downturn. The multiservice provisioning platforms, which may sit in a central office, allows carriers to upgrade capacity at a node within a few minutes, rather than days, says Rob Koslowsky, director of marketing at Cisco Systems Inc. optical transport group.

A customer like Qwest, which purchased Cisco’s ONS 15454 Metro Optical Transport Platform, can scale an OC-3 to an OC-48 and an OC-48 to an OC-192 in less than 15 minutes, Koslowsky says. Without the multiservice platform, which is about the size of a 19-inch TV, it would take the Bells days to perform an upgrade, he says.

There are interfaces on the platforms for gigabit Ethernet, which means the Bells can use the platform to deploy Ethernet services when they are ready, says Koslowsky. Telcordia has certified the platform. Cisco has shipped more than 4,000 ports to service providers for gigabit Ethernet, Koslowsky adds.

IDC projects the multiservice provisioning platform market will be valued at $6 billion in 2005.

“Efforts are being taken to make some SONET more suitable for a data-centric environment we have today so I think the technology has substantial legs left in it,” says BellSouth’s Lardieri.

Wholesale Entry

IDC senior research analyst Ron Kaplan says gigabit Ethernet has started to gain traction only this year. Most Ethernet-based services are being offered to enterprises, but Ethernet ultimately will extend to the wholesale market, he says.

He says the Bells are approaching gigabit Ethernet with caution because they do not want to cannibalize their other transport revenue. Frost & Sullivan wholesale analyst Rod Woodward agrees, saying they don’t want to lose revenue for their established T-1 and T-3 lines among other data services.

Yankee Group analyst Seth Libby says the Bells basically have a lock on the local wholesale market. In 1999, the most recent year the FCC has provided statistics, the Bells’ comprised $5.2 billion of $7.5 billion in revenue in local private line transport. Other local exchange carriers comprised $1.4 billion in revenue that year.

Still, metropolitan carriers are chipping away in select regions, linking their networks to strategic points of presence and carrier hotels.

The next-generation providers operating in the metro market say they have another huge advantage over the Bells. They are starting to provide bandwidth on demand, allowing wholesale customers to add capacity instantly.

All the competing metro carriers underscore that the Bells are expensive. Incumbent local exchange carriers typically charge 30 percent more for an OC-3 and a larger circuit in U.S. cities than a metropolitan provider, contends Ian McPherson, director of product management at Sigma Networks Inc. And, compared to a new carrier, he says it can take the incumbents five to 10 times longer to provision a large circuit.

But while critics say the Bells are a slow-moving, expensive machine, BellSouth executives say they have made it a priority to speed up provisioning intervals and negotiate better deals. Where facilities are available, BellSouth now promises wholesale customers it can provision a DS-1 circuit in five to eight days. They also say they back the offer with a service installation guarantee: If they fail to meet the timeline, they will forgo a nonrecurring charge. The offer is part of the company’s recent transport initiatives.

BellSouth executives also say they can offer more competitive prices in 26 metropolitan statistical areas after receiving approval from the FCC this year to negotiate one-on-one contracts with carriers. Before the FCC gave BellSouth and other Bells such approval, all prices were set forth in tariffs. In other words, there were no negotiations.

Ad Allen, BellSouth interconnection services director of product management for dedicated transport, said prior to the order BellSouth was mandated to provide the same price to all customers. “This new order allows BellSouth to reward its loyal customers with incentives based on their willingness to sign volume and term agreements unique to the pricing flexibility metros,” she says.

Under the new rules, BellSouth already has signed a three-year agreement with an unnamed interexchange carrier. The IXC will receive a discount based on the volume of traffic the company diverts to BellSouth. The terms of the contract still are filed with the FCC.