If an old sentiment about cable companies holds true in this new era of communications – that cable executives tend to move slowly when evaluating new technologies but act swiftly once a decision is made – then 2007 is likely to be the year that MSOs (multiple system operators) take major strides in their run toward offering high-bandwidth voice and data business services. And recent movements suggest that carrier Ethernet is the technology horse MSOs are betting on to access and serve those business customers.
“Ethernet is a must-have evolutionary piece of our product portfolio,” says Kristine Faulkner of Cox Business Services.
It’s “a critical piece of driving growth,” echoes Ken Fitzpatrick, senior vice president, Time Warner Business Class, “a technology that really is supporting what the customers are requiring.”
| Forecast of U.S. Business Passed by Cable | ||
| 2006 | 2010 | |
| Small (1 to 9 employees) | 3.8 million | 5 million |
| Medium (10 to 99 employees) | 0.3 million | 0.7 million |
| Large (100+ employees) | 0.2 million | 0.4 million |
| Total | 4.3 million | 6.1 million |
| Source: Kagan Research, LLC | ||
By the end of last year, for example, MSOs and their infrastructure suppliers started to become active members in the Metro Ethernet Forum. Cable operators already MEF 9 certified include Cablevision Lightpath, Colt, ntl: Telewest, Time Warner Cable and RCN, while Cox Communications expects certification this year.
Other familiar cable players are expected to come on board in the near future, says Nen Chan, MEF president, and many operators are requiring all relevant equipment purchased to be MEF certified. “MEF is expanding to the access area, as well,” says Chen, “making Ethernet a common denominator for business services.”
It’s also probably not insignificant that the MEF’s 100th member was cable infrastructure supplier ARRIS. “As our MSO customers increase their focus on serving business customers, we believe MEF compliance will be a key success factor in their inevitable growth in this market segment,” says Bryant Isaacs, president, new business venture for ARRIS.
A good deal of that “inevitable” growth, at least in the near term, will come at the expense of independent and competitive telecom service providers. Albeit cable’s Ethernet offerings up to this point largely are being delivered over their relatively small but growing fiber-based networks, MSO executives believe their existing coax plant, abundant in the first mile, is well positioned to serve commercial-class Ethernet services to the sub-10 Mbps market segment.
“The sub-10 Mbps market is one of the fastest-growing areas of Ethernet services,” says Faulkner. “We intend to serve that with both our fiber as well as significantly leveraging our coax network.”
Vertical Systems Group, for its part, forecasts $5 billion of cumulative revenue for Ethernet services below 10 Mbps. “And this growth in popularity is among small and medium businesses, among remote and branch offices of large businesses,” says Louise Wasilewski, vice president business development for Narad Networks. “These are the very customers that cable operators are very well positioned to target and to serve because of the nature of the hybrid fiber coax plant that cable operators already have in place.”
| MSO Tiered Service Package Sample | |||
| SLA Attributes | Best Effort (CoS) SLA | Priority Traffic (CoS) SLA | Virtual LAN (CoS) SLA |
| CIR DS/US | No SLA | 2M/2M | 10M/10M |
| Latency (one way) | 5ms to 15ms | 50ms | |
| Delay Variation (jitter) | 2ms to 5ms | 2ms to 5ms | |
| Packet Delivery | 99.9% to 99.995% | 95% to 99.9% | |
| Network Availability | 99.9% to 99.995% | 99.9% to 99.995% | |
| Time to Repair | 4 hours | 4 hours | |
| Source: ARRIS | |||
Cox, for one, has about “four to five times the amount of coax in the ground comparative to our fiber reach,” says Faulkner. So it’s easy to understand why the cable community requires “standards and specifications that are designed to cooperate with our HFC infrastructures.”
According to analysts at Kagan Research, cable plant already passes about 3.8 million small businesses in the U.S. and about 4 million businesses altogether, or about 60 percent of firms, by some estimates. Kagan expects that number to jump to 5 million small businesses and 6.1 million total businesses by 2010.
Furthermore, just as businesses often are clustered in particular areas within a metro market, due to planning and zoning rules, so too are cable HFC nodes built in clusters, with each node serving about a 0.5 square mile area. So MSOs can be selective as to which nodes get upgraded, thereby minimizing the capital investment risk, says Wasilewski.
After analyzing three different metro areas of different sizes, for example, researchers at Stratsoft determined that about 50 percent of business revenues are available to cable operators by building out just the first 5 to 7 percent of nodes. After breaking down business bandwidth demand into a range of service values (ranging from $100 to $250 a month up to $10,000 a month), Stratsoft determined that MSOs could generate about $4 million worth of business services again by serving just the first 7 percent of nodes, assuming about 25 percent penetration.
“This is the symmetrical committed information rates that carrier Ethernet is perfectly positioned to provide,” says Wasilewski.
By building out 28 percent of nodes, or about a quarter of cable plant, MSOs can target more than 70 percent of potential business revenues, suggests Stratsoft research. In other words, “Cable can go after the commercial services market, selling carrier Ethernet services, with a relatively small investment and still be able to go after the lion’s share of the market,” says Wasilewski.
Certainly, telcos and other traditional commercial providers can rest assured that MSOs still face some hurdles to becoming established providers of business-class bandwidth services, including achieving tighter alignment between CableLabs’ DOCSIS standards and Metro Ethernet specifications, as well as overcoming end-user perceptions that mission-critical connectivity and applications are the domain of more traditional providers.
On the other hand, Ethernet is not exactly unfamiliar territory to most MSOs. “Ethernet is widely used in our transport network,” says Fitzpatrick, “as we transport video-on-demand services, voice services and distribute video across our network.”
Indeed, Ethernet has become the technology of choice for interconnecting MSO headends and hubs, and often customer support communications occur over Ethernet, say sources at MEF. So, much like telecom carriers, cable now simply is offering its customer base the same flexibility and cost advantages that it already enjoys internally.
As far as existing end-user offerings, “transport services make up about a quarter of our revenue here at Cox Business Services,” says Faulkner, “with Ethernet distinctly representing the largest contributor of growth in our transport business.” Cox Business Services, which has been offering transport services since 1993, was expected to generate about $500 million in revenue in 2006 and is forecasted by the company to hit $1 billion by 2010. A few verticals in which Cox has found early success include healthcare, government and education, says Faulkner.
Meanwhile, U.K.-based ntl: Telewest, the first operator in Europe to gain MEF certification, currently is providing Ethernet backhaul to “most, if not all, of the U.K. unbundlers,” says Andrew McGrath, company director of marketing strategy, “particularly those that are currently unbundling BT local exchanges to gain access to BT local loop copper.”
Ethernet also is being employed by ntl: Telewest to deliver IP closed-caption TV, a solution that “offers the clear room to convergence for security and general communications onto a single network,” says McGrath.
MSO executives also are hoping MEF participation and certification will help promote confidence among business buyers regarding the ability to deliver carrier-class services, as well as provide added credibility in the marketplace. Similarly, CableLabs is working on a modification of its DOCSIS standards to bring them into line with carrier Ethernet specifications.
And after DOCSIS 1.1 added security and quality of service features to the original specification, allowing for robust voice services, DOCSIS 2.0 included enhancements that enabled nearly symmetrical access transport speeds with the downstream at 38 Mbps and increasing the potential upstream bandwidth to 30 Mbps, say executives at ARRIS. Data throughput in the downstream beyond 38 Mbps was one of the driving forces behind DOCSIS 3.0., and now that DOCSIS 3.0 specifications are finalized, MSOs are able to offer symmetrical Ethernet services at transmission rates beyond 150 Mbps.
Although no equipment at press time had yet been certified as DOCSIS 3.0-compliant, many manufacturers have “pre-3.0” solutions, says ARRIS.
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