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Utilizing Ethernet in the access and beyond is also appealing to Service Providers primarily because it simplifies their infrastructure, reduces costs, and most importantly, offers a new source of potential revenues Ethernet can be offered on a variety of infrastructures, and delivering over one infrastructure versus the others means the cost structure also varies (since some infrastructures are more optimized than others) and impacts profitability That enterprises are also demanding Ethernet for the reasons discussed previously further reinforces this appeal The key benefits of Ethernet to Service Providers are summarized next Since more granular services are delivered using Ethernet, there is an opportunity to derive more revenues than with TDM services; for instance, if a customer has subscribed to a T-1 circuit, then if additional bandwidth, say 5M is required, the usual option is a T-3/DS-3 circuit, a 28 times increase in bandwidth at probably 15 times the price of a T-1, with over 80 percent wasted This rather undesirable option may actually lead to the customer putting off purchasing the DS-3 until much later and consequently deferring Service Provider revenues With a 5M offering over Ethernet, of course, revenues can be immediately realized Frequently, however, the market pricing is such that a customer will likely just purchase a 10 Mbps Ethernet circuit from the Service Provider for a nominally higher price (but still decidedly less than the price of a DS-3) Such a scenario is a win-win solution for both the Service Provider48 and the customer Almost all major Service Providers in the US and elsewhere are providing granular Ethernet bandwidth in increments of 1M
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Higher Revenue Potential Through More Granular Bandwidth Offering Delivering Multiple Services over a Single Interface Using a single Ethernet interface, a Service Provider can offer a vast array of Ethernet-based services (such as Internet access, LAN extension, Transparent LAN) for low marginal costs Employing Virtual LAN tagging, for instance, and with a bandwidth and performance profile, each of these services can be delivered on the same physical interface With VoIP, voice applications, and the potential developments in the area of circuit emulation (see 3) of other TDM services, almost all current services can be offered over an Ethernet interface This scenario, which is not plausible with traditional TDM services, enables a Service Provider to leverage a single physical interface and derive the maximum revenue from that interface; more importantly, it positions a Service Provider to be able to deliver all
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Even though revenue per bit has possibly decreased, this could mean additional revenue from the customer
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services optimally and hence maximize the potential revenue from customers It also provides convenience and simpler management by using a single physical interface for multiple services (as noted in the end-user benefit discussion) Ethernet enables Service Providers to modify or upgrade the services offered to enterprise customers remotely This capability offers the Service Providers two major benefits (apart from speedy delivery for the enterprise user): reduced cost of introducing additional bandwidth and an increase in revenue velocity For example, given the acceptably low marginal cost of deploying a 1000M versus a 100M connection, Service Providers can physically provision a 1000M port even when the customer initially requires much less bandwidth, say 25M In this case, the Service Provider would only commission 25M of bandwidth (ie, the customer can only use 25M even though the physical port can support up to a 1000M) Then, when there is a demand for higher bandwidth in the future (as will invariably be the case), the Service Provider can increase bandwidth remotely using software and without having to send a technician (truck roll) to the site and without having to bring down the service for any meaningful amount of time (perhaps for no more than a few minutes) Speedy delivery of additional bandwidth, unprecedented in the TDM world, is increasingly expected these days With TDM, this would simply not be possible; there would be significant downtime, change out in the physical ports on either end, and additional testing needed An MEF commissioned study using a realistic scenario of 100 users receiving a host of services (private line and Internet access) over TDM (see Figure 115) showed that with Ethernet, the service provisioning cycle was reduced by 14 weeks and yielded revenues of $75 million in this period alone
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