Skip to main content
SpectralShifts Blog 
Sunday, November 13 2011

A humble networking protocol 10 years ago, packet based Ethernet (invented at Xerox in 1973) has now ascended to the top of the carrier networking pyramid over traditional voice circuit (time) protocols due to the growth in data networks (storage and application connectivity) and 3G wireless.  According to AboveNet the top 3 CIO priorities are cloud computing, virtualization and mobile, up from spots 16, 3 and 12, respectively, just 2 years ago!   Ethernet now accounts for 36% of all access, larger than any other single legacy technology, up from nothing 10 years ago when the Metro Ethernet Forum was established.  With Gigabit and Terabit speeds, Ethernet is the only protocol for the future.

The recent Ethernet Expo 2011 in NYC underscored the trends and importance of what is going on in the market.  Just like fiber and high-capacity wireless (MIMO) in the physical layer (aka layer 1), Ethernet has significant price/performance advantages in transport networks (aka layer 2).  This graphic illustrates why it has spread through the landscape so rapidly from LAN to MAN to WAN.   With 75% of US business buildings lacking access to fiber, EoC will be the preferred access solution.  As bandwidth demand increases, Ethernet has a 5-10x price/performance advantage over legacy equipment.

Ethernet is getting smarter via a pejoratively coined term, SPIT (Service Provider Information Technology).  The graphic below shows how the growing horizontalization is supported by vertical integration of information (ie exchanges) that will make Ethernet truly “on-demand”.  This model is critical because of both the variability and dispersion of traffic brought on by both mobility and cloud computing.  Already, the underlying layers are being “re”-developed by companies like AlliedFiber who are building new WAN fiber with interconnection points every 60 miles.  It will all be ethernet.  Ultimately, app providers may centralize intelligence at these points, just like Akamai pushed content storage towards the edge of the network for Web 1.0.  At the core and key boundary points Ethernet Exchanges will begin to develop.  Right now network connections are mostly private and there is significant debate as to whether there will be carrier exchanges.  The reality is that there will be exchanges in the future; and not just horizontal but vertical as well to facilitate new service creation and a far larger range of on-demand bandwidth solutions.

By the way, I found this “old” (circa 2005) chart from the MEF illustrating what and where Ethernet is in the network stack.  It is consistent with my own definition of web 1.0 as a 4 layer stack.  Replace layer 4 with clouds and mobile and you get the sense for how much greater complexity there is today.  When you compare it to the above charts you see how far Ethernet has evolved in a very rapid time and why companies like Telx, Equinix (8.6x cash flow), Neutral Tandem (3.5x cash flow) will be interesting to watch, as well as larger carriers like Megapath and AboveNet (8.2x cash flow).   Certainly the next 3-5 years will see significant growth in ethernet and obsolescence of the PSTN and legacy voice (time-based) technologies.

Related Reading:
CoreSite and other data centers connect directly to Amazon AWS

Equinix and Neutral Tandem provide seamless service

 

Posted by: Michael Elling AT 12:46 pm   |  Permalink   |  0 Comments  |  Email
Email
Twitter
Facebook
Digg
LinkedIn
Delicious
Google+
StumbleUpon
Add to favorites

 

Information Velocity Partners, LLC
88 East Main Street, Suite 209
Mendham, NJ 07930
Phone: 973-222-0759
Email:
contact@ivpcapital.com

Design Your Own Website, Today!
iBuilt Design Software
Give it a try for Free