Metro Ethernet study: Opex benefits for existing networks

PointEast Research worked with 36 service providers to identify operational-expenditure (opex) savings for Ethernet-based services compared to legacy private line, Frame Relay (FR), and ATM services. These results provide a detailed picture of the steps required to deliver a single data service to an enterprise customer, then monitor that service. The results provided not only a model for accurately tracking opex cost, but also clearly identified potential cost savings for Ethernet that can continue to grow over time.

Using actual data, a real world forecast model was constructed for a typical metro area, with a population of one to two million people and 50,000–80,000 businesses. The model compared the opex savings over a three-year period for Ethernet Line (E-Line) and Ethernet LAN (E-LAN) services versus legacy private line (T1/E1, T3/E3, and higher OC-n/STM-n services) and FR/ATM virtual circuit services. As defined by the Metro Ethernet Forum, E-Line services are point-to-point, while E-LAN services are multipoint. The results of this study are compelling:

Ethernet-based services can reduce opex by 23% for service providers, which can represent millions of dollars per metro area.
These opex savings can grow each year and could increase as Ethernet technology and services mature.

These savings are driven by service providers' abilities to automate Ethernet operating processes and significantly reduce the number of truck rolls required. The management systems of Ethernet networks can simplify the configuration of services, reducing the time to deliver services to customers. Once these services are in place, customer requests for greater bandwidth or additional services are done via a quick software adjustment versus a time-consuming and costly truck roll.

The scenario model tracks the deployment of services from an existing network by a single service provider within a single medium-sized city over a three-year period. For the purposes of this analysis, a mix of E-Line and E-LAN services is compared with an equal amount of traditional SONET/SDH private line and FR or ATM services. Based on the defined number of services, the scenario analysis tracks the initial provisioning of these services, service bandwidth upgrades, customer-site additions, customer-service additions, and service monitoring requirements.

The results of the scenario model show that metro Ethernet services can provide material savings for service providers' operations. Based on the analysis, these savings would be 23% versus legacy data services.

The scenario model tracks four network operations functions: planning technicians, field technicians, central-office technicians, and network operating center operations. These four categories track the labor functions necessary to deliver a service to a customer and monitor that service during usage. Therefore, delivering real opex savings from these functions will improve a service provider's financial results.

These opex savings are cumulative and grow over time, since there are different levels of savings associated with different types of operating functions. The overriding consideration is that these savings are associated with a young technology. Many standards and operating methods are still under development and being improved upon. Also, most service providers have not yet fully leveraged all the functionalities of Ethernet and are still on a learning curve. As service-provider familiarity with Ethernet grows and as standards are developed and implemented, these opex savings have the potential to become even greater.

Ethernet-based services do provide opex savings to service providers today, and these savings can increase over time. At a 23% savings level, these savings can amount to tens of millions of dollars across multiple cities within a service provider's territory.

A scenario model is developed that tracks the deployment of services from an existing network by a single service provider within a medium-sized city over a three-year period. Analysis of the results shows metro Ethernet services can save service providers as much as 23% in operating expeditures versus legacy data services.

The future benefits are based on the fact that today's savings come from a technology still viewed by service providers as "new." Most service providers are still in the process of fully understanding Ethernet and how to leverage its capabilities. It will be a couple of years before Ethernet can be fully understood by all the engineers and technicians supporting these services. "Experience curve" savings beyond what is reflected in today's figures can therefore increase these savings.

Ethernet equipment also takes time to be adopted into a network. Most service providers have a large installed base of legacy equipment serving existing customers. As Ethernet is increasingly worked into this legacy network, service providers will be better able to leverage its efficiencies over a greater number of services and customers.

But the equipment vendors still need to address certain service-provider issues and concerns, which revolve around making vendor equipment carrier class and finalizing certain industry standards to rectify limitations of Ethernet equipment. However, resolving these issues and concerns will only drive greater opex savings delivered by Ethernet.

Brian Van Steen is a principal with PointEast Research (San Francisco).