Source: Comms Dealer September 2012
Right now I think we are at the start of another of those moments of technological change and great opportunity.
You are all probably sick of hearing about the Ethernet boom. Of course demand for Ethernet in the mid-market has increased significantly as companies realise that DSL is just not going to cut it for them going forward. And prices have fallen, but more because carriers were making super profits and protecting their traditional leased line bases than because of a step reduction in cost of supply – until now.
In the UK the vast majority of Fibre Ethernet circuits are delivered via an Openreach Ethernet Access Direct (EAD) tail and on average this makes up around 50% of the total cost of the circuit. Some carriers will dig up the road themselves (VMB, COLT, C&W) but they are in the minority and even they will use EADs where it makes economic sense to do so.
BTW and TTB are the biggest suppliers of EFM (Ethernet First Mile) which is where the Ethernet circuit is delivered using multiple copper pairs bonded in the exchange rather than via an EAD. Of course being copper it suffers from similar quality and long line issues that you get with broadband and you have to keep adding pairs to increase the speed, which proportionally increases the cost.
BTW recently told me that they had stopped the roll-out of EFM in favour of a technology called GEA (Generic Ethernet Access). This is essentially using Fibre to the Cabinet (FTTC) to deliver the last mile of an Ethernet circuit. BT are already rolling out FTTC anyway as part of their broadband strategy but this is still a best-efforts contended service and doesn’t compare to Ethernet in terms of performance and SLA. An FTTC tail plugged into an Ethernet circuit can give you a 10/10 or 20/20 uncontended service with an Ethernet SLA for less than 4% of the monthly rental of an EAD. This is nearly a 50% reduction in the underlying production costs of these popular lower order Ethernet circuits.
Furthermore because BT does not have to blow fibre into every building the lead times are both shorter and more predictable. There is generally no need for way leaves, civils, landlord’s permission or the dreaded ECCs (Excess Construction Charges). The circuit is presented on a single pair with a standard Ethernet connector and so looks (and performs) like any other Ethernet circuit.
At the moment only BTW are in the market with a GEA product based on FTTC and with too few exchanges enabled at the moment to make much of a splash. However TTB are set to launch a competing product soon, which normally galvanises BT, and watch out for Ethernet delivered via FTTP (Fibre to the Premises) which will offer speeds up to 100Mbit/s at less than 9% of the price of the equivalent EAD.
There are around 400,000 SMEs in the UK with between 5 and 50 employees, the majority of which are struggling with ADSL. As the pressure on them to get into the cloud mounts and GEA rolls out there will come a point when the damn bursts and the market is flooded with demand for cheap, fast, reliable Ethernet.
You may want to make sure you are ready with a product when this happens.