Expansion of Carrier Ethernet Services across Europe Inevitable

Frost: Facilitated by operator network migrations, enterprise demand, new application requirements, as well as by the inherent benefits of Ethernet technology, Carrier Ethernet services are poised to expand across Europe. While some applications will take off later rather than sooner, they will nevertheless, generate a surge in demand for Ethernet services later in the product cycle. Carrier Ethernet Services in Europe earned revenues of $1.10 billion in 2005 and estimates this to reach nearly $5.00 billion in 2012.

Bandwidth intensive applications, the introduction of new services and the need to reduce cost are creating a need to move from traditional, bandwidth limited, telecom services to technologies such as Ethernet. End users are requiring services that are more flexible and scalable hence generating savings by contracting what they actually need.

Carrier Ethernet services in the metropolitan space are becoming increasingly popular as the technology evolves and becomes standardised. The deployment of services such as triple play is creating a demand for Ethernet services in the metropolitan space for aggregation of data and transport in the backbone. Furthermore, with the launch of third generation mobile services, mobile data usage is expected to surge along with wireless backhaul traffic, currently transported over connections averaging 2Mbps.

Out of a need to achieve cost efficiencies and augment service offerings, operators are migrating their networks to next generation infrastructures based on IP and Ethernet. Consequently, legacy services will be phased out and Ethernet will be replacing layer 2 services.

However, customer awareness is being affected by the limited footprint of these services. In the long haul, the offering of carrier Ethernet services is restricted. Few pan-European operators have a consistent offering across Europe, while national operators have been introducing long haul services only in the recent past.

There are still standardisation issues to overcome. The lack of interoperability testing until the end of 2005 obstructed the possibility of extending carrier Ethernet services on an end-to-end basis when several carriers were involved.

Many operators have resorted to proprietary certification processes. Furthermore, operators with a large customer base have regarded the introduction of carrier Ethernet services as cannibalising revenues from legacy services.

Generally, Carrier Ethernet services are perceived as less expensive than legacy services. To build on this advantage, it is important that service operators follow strategies that keep adding value to the service and prevent it from becoming another telecom commodity.

Carrier Ethernet Services in Europe Publ 20060726