FEATURE
“One of the nice things about Ethernet is the variety. We’ll probably see more unity of pricing though”
John Hoffman, head Ethernet product management, VPN services division Tata Communications
“There’s not one price that fits all situations,” says Sarita Fernandes,
senior director of product management at Reliance Globalcom. “For price, you need to understand what customers really want. Everyone has different needs. Otherwise we’re heading down the path of commoditisation.” John Hoffman, head of Ethernet product management for the global VPN services division at Tata Communications, is also wary of a drift to homogeneity: “There was a big call a few years back to ‘standardise Ethernet’,” he recalls. “There’s less of that talk now. One of the nice things about Ethernet for a lot of people is the variety. We’ll probably see more unity of pricing though, although we’re probably 10 years off true pricing consistency.” There’s more to seeking out the perfect wholesale partner than just the issue of price, argues Emma Forrest, product manager for Ethernet at Cable & Wireless Worldwide: “We price our Ethernet in two bands, locally and nationally,” she says. “You can go from London to Edinburgh for not much because of our national network. It’s MPLS so more efficient than a legacy network. Scale is something important to look for in a wholesale partner.”
REGIONAL VARIATION The differential in the pricing of Ethernet is not evident simply between different types of services, but also by region (see box on p25). So why is Ethernet connectivity between Asian PoPs so much higher than in mainland US?
“Pricing for Ethernet services around the world clearly mirrors, by 26
geography, other types of service,” says Kreifeldt. “That’s because although Ethernet is a newer type of service, it’s layered on top of the same network that’s always been there. “If you look at places where there is not much Ethernet, like Africa, the priority there is just to get the basic network in, then get on to deciding what layers of service you’re dealing with. There are fundamental needs that must be answered first. If you look at a more developed market, like Latin America, there’s less competition there in services generally than there is in, say, north America, and that’s going to reflect in the price of Ethernet regardless of what layer of network you’re talking about.” The more even and market-driven pricing of a mature market like north America is only really skin deep, argues Walters of AT&T: “The carrier Ethernet market in the US looks on the face of it to be commoditised and stable,” he says. “But if you look back not all that far in time, you see a market full of variables, slowly migrating to the sort of commonality and consistency that generates confidence. As service providers we all recognise this is necessary, which is why we all belong to the MEF. If Ethernet is to be the dominant technology over time, as planned, then standards will need to continue to emerge. We’re still at an early stage though. It’s a that than can take years, and the MEF has a lot on its plate in terms of new standards to drive.” Bhattacharyya of IDC sees Ethernet’s regional pricing differential dissipating over time: “I also see more and more Ethernet connectivity in remote locations,” she says. “Because the world is becoming more globalised, it just makes sense to be able to interoperate better.”
EVENING OUT Telegeography’s Kreifeldt also anticipates a smoother landscape, casting ahead a year or more: “I’d imagine that the wide range of pricing we’re seeing, and which is reflected in our report samples, is going to even out over the next three of four years,” he says. “Maybe we’ll see those offering the lowest prices raising them or the higher prices falling, or both. Maybe at least the different performance levels implied by the pricing will at least be more apparent and more rational. At the moment you have to factor in that carrier Ethernet is a new product in hot demand, and that’s not generally a catalyst for prices to fall. Remember that a year or so ago, a lot of the product we’re seeing on the market didn’t exist yet.” Product lines, he believes, will mature, and be both better understood and easier to compare with other prices: “Customers will gravitate towards those services that work for them,” he predicts. “Exactly where the balance will be found between standardisation and differentiation – bearing in mind you’ve got opposing forces with different motives – I don’t know.” Ethernet will not only decrease in cost, but will continue to delivering
more features and better performance for that decreased cost, predicts Reza Vaez-Ghaemi, technology manager for emerging markets at vendor JDSU.
“The wide range of emerging IP applications requires a technology that can meet both high-end performance and low-end cost-sensitive cases,” he says. “While Ethernet is not expected to be the perfect and exclusive solution, it definitely delivers many components necessary for the this wide range of applications.” ■
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