More enterprises are relying on IP-based business services for mission-critical operations. Local area network (LAN) extension, virtual private networks (VPNs), voice-over-Internet Protocol (VoIP), multicasting, remote storage, supply-chain management and distributed work sharing, databases and processing are all playing increasingly prominent roles in enterprise networking.

The trend toward Ethernet as the preferred medium for transporting IP-based business applications has been long forecasted, and the swing from early adoption to mass-market deployment appears to be at last underway. Two key obstacles have been overcome: ubiquitous service availability and the absence of Service Level Agreements (SLAs) similar to those that enterprises have come to expect with Frame Relay, Asynchronous Transfer Mode (ATM), Private Line and other traditional data services.

With these hurdles to broad-scale adoption of intelligent Ethernet services cleared, the promise of Ethernet—as a prime revenue opportunity for carriers and a flexible, low-cost enabler of high-bandwidth business applications for enterprises of any size—is being fulfilled. The next phase in Ethernet development has arrived: mass-market rollout. Infonetics Research predicts carrier revenues from Ethernet services to swell to more than $22 billion in 2009—up from $2.5 billion in 2004.

The promise of Ethernet

Ethernet was once used strictly as a protocol for connecting computers, printers and other local devices inside an office building, but for the last several years, the technology has been seen as the key transport foundation for wide area network (WAN) business services.

Carriers and enterprises envisioned “LAN-in-the-WAN” networking, in which LAN-quality application performance is extended cost-effectively across the WAN. Considering that a 10Mbit/s Ethernet link costs about the same as a 1.544Mbit/s T1 connection, the per-bit cost for Ethernet access runs at about one sixth that of traditional offerings. And the favorable price-performance ratio is only one reason for the interest in Ethernet services.

There’s also the familiarity factor. Enterprise information technology (IT) departments have looked at Ethernet as a refreshingly simple and scalable solution for adapting their network for growth, globalization, mergers and acquisitions and e-commerce. All client/server systems, personal computers and upper-layer protocol stacks (such as TCP/IP, IPX and NetBEUI) are compatible with Ethernet, and more than 90 percent of the network connections across the enterprise LAN are Ethernet ports.

Despite the interest, the marketplace for managed or intelligent Ethernet services saw a number of false starts. Until recently, few carriers have sought to roll out Ethernet offerings over their entire coverage areas. The problem was that they found profitability to be difficult to achieve because of vexing access issues. Deploying, managing and maintaining services proved operationally complex and expensive with enterprise Ethernet equipment that was not purpose-built for Ethernet service delivery. This further pressured carrier profit margins, which were already under pressure from the lower price per bit in the Ethernet services market.

On the enterprise side of the service equation, enthusiasm has been tempered by the lack of Service Level Agreements (SLAs) backed with meaningful business terms. Best-effort Ethernet services are just not suitable for mission-critical applications. Yet, unable to assure Ethernet service performance across their own and/or leased infrastructure, carriers have been reluctant to commit to stringent SLAs with penalty clauses. Without those hard performance guarantees, enterprises generally have not been inclined to commit mission-critical applications to Ethernet services—even at a substantially lowered cost.