ACG Research

ACG Research
We focus on the Why before the What

Tuesday, March 19, 2013

The Business Case for Ethernet Services for Mid-Sized Businesses

Network-based applications such as Voice over IP (VoIP), cloud, collaboration services and video applications of all kinds are driving the need for high-speed, high-quality and reliable networks that exceed the capabilities of the services many businesses are using today. Bandwidth requirements are forcing growing businesses to rethink their networking solutions. For example, we estimate that mid-sized business sites will require 25 Mbps to 85 Mbps of bandwidth over the next three years. TDM-based access networks in use today are poorly positioned to meet these emerging network service needs. They do not scale easily to meet higher bandwidth requirements, and quality guarantees and resiliency features must be added via a switching or routing overlay.

Ethernet services scale from 1 Mbps to 10 Gbps and beyond and have built-in quality and resiliency features that are compliant with industry-standard Carrier Ethernet specifications. When combined with an Ethernet LAN, Ethernet services provide an end-to-end Native Ethernet solution. This makes Ethernet services easier to install, operate and maintain than TDM-based access service alternatives.

For typical mid-sized businesses, ACG Research compared the monthly recurring costs of Ethernet versus TDM access for point-to-point, point-to-multipoint, and multipoint-to-multipoint network configurations. We found that Ethernet services have 56 percent to 71 percent lower costs than TDM-based alternatives. In addition, Ethernet services provide a complete end-to-end solution, while a switching or routing overlay must be added to the TDM access service to create a complete solution.

An analysis of scaling economics of Ethernet and TDM/SONET access services shows that Ethernet solutions are available at many bandwidth speeds with gradually increasing prices. In contrast, TDM bandwidth speeds are limited with steep price steps as speed increases. The TDM scaling behavior creates bandwidth barriers to increasing network capacity that can be overcome by switching to Ethernet services. 

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