WorldCom Launches First Nationwide Ethernet WAN

Service could lower costs, but some prefer the do-it-yourself approach

InformationWeek Staff, Contributor

May 17, 2002

4 Min Read

Ethernet, the dominant protocol for business LANs, is becoming more prevalent as a data-transport service connecting customer sites across town and even across the country. Last week, WorldCom launched the first wide area network service available nationwide, initially in and between 84 U.S. cities.

Other carriers, including Broadwing, Qwest, and SBC, are developing similar offerings. Until now, businesses could buy regional Ethernet services or nationwide "transparent LAN" services, which require protocol translations. But WorldCom is the only carrier with a nationwide service capable of delivering Ethernet traffic without protocol translations, analysts say.

Suffering from falling profits and a glut of bandwidth, carriers have been slow to release new services in the past year. Demand for Ethernet WAN services will leverage some of that capacity, and WorldCom hopes that will help its financials. The $35 billion No. 2 long-distance carrier has seen its stock price fall from a high of $64.51 per share in 1999 to $1.08 last week.

Businesses are drawn to Ethernet outside the LAN for its high speeds, affordability, and ease of management. The Yankee Group predicts metropolitan area Ethernet services revenue will jump from $265 million in 2001 to $4.1 billion in 2006. Demand for wide area Ethernet transport is also on the upswing for applications such as storage area networks, content delivery, Internet telephony, and video. "The customers are saying that if you're not going to do it, we're going to build it ourselves," says Marian Stasney, a Yankee Group analyst.

The carriers hope to capitalize on that demand by offering and managing Ethernet WANs, eliminating the potential headaches of building and managing them in-house. Whether that helps WorldCom's finances or those of other carriers remains to be seen.

"We've been hearing about end-to-end Ethernet for a while, given the intrinsic benefits of the technology," says Ron Westfall, an analyst with Current Analysis. "But I don't know if it's going to do too much for WorldCom in the near term."

Think Outside The LANThat may depend on the sales job. Ethernet WAN services offer several advantages. They're faster than data services such as frame relay or asynchronous transfer mode. Also, they're easier to manage than other data services, because they have standard Ethernet interfaces, which LAN administrators understand. That results in lower operational costs, Stasney says.

The trouble is that carriers so far haven't done a good job explaining how Ethernet WAN services fit into their overall data portfolios or how customers will migrate from other offerings. They also haven't clearly articulated cost-savings benefits.

Those drawbacks didn't stop Andrews & Kurth LLP, a Houston law firm, from buying WorldCom's service. Installation time, convenience, speed, and affordability were key selling points, CIO Lynn McGuire says. "The bigger driver was time and the long-term costs, with time being a primary issue for us," he says.

Two weeks ago, the law firm started testing the service at 155 Mbps between its headquarters and a nearby satellite office where it's less expensive to house its IT and administrative staffs.

The move wouldn't have made sense without the high speeds available from Ethernet, McGuire says. "Otherwise, it would have defeated the purpose of having people off-site, only to have them crippled by lower bandwidth," he says.

The firm also considered building its own Ethernet network on a private fiber link, using microwave links or multiplexing several T1 lines. It decided that WorldCom's Ethernet was fast and easy to manage and was about the same price or a little less than other services, McGuire says. The law firm isn't worried about WorldCom's precarious financial condition because, once installed, the fiber-optic infrastructure between the firm's two sites will always be in place, even if WorldCom files for bankruptcy or is acquired.

Despite the availability of Ethernet WAN services from carriers, some businesses still prefer to build and manage their own wide area Ethernet networks using dark fiber and their own equipment. "What I'm trying to do is use our existing equipment to provide better connectivity for our users. I want to jump over, not step sideways," says Joseph L'Italien, senior programmer for Kaiser Permanente's Southern California region. He wants to consolidate network traffic and eliminate bottlenecks in public services.

The WorldCom service carries data from an optical Ethernet switch at a customer site and across WorldCom's local fiber-optic access networks to its core Sonet backbone, where it uses add/ drop multiplexers to carve out bandwidth. WorldCom uses equipment from Nortel Networks Corp. The service can be configured in a point-to-point or meshed architecture with port speeds from 10 Mbps to 1 Gbps and transport from 1 Mbps to 500 Mbps.

In general, Ethernet services are expected to cost less than other data services. In WorldCom's case, list prices for the services range from monthly per-circuit charges of $630 to $200,000, depending on speed and configuration.

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