Carrier Ethernet and MPLS in Asia Pacific

CEN Feature (Apr 12 2011)

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   Despite the challenging business climate in 2009 and 2010, the Asia-Pacific region WAN services market grew by 6.2 percent as a result of strong demand for MPLS and Carrier Ethernet services. Revenues from legacy technologies such as ATM and Frame Relay continued to decline, while growth in leased circuits remained modest in this period. Most existing ATM and Frame Relay circuits will likely be gradually phased out during the next three to five years as operators rationalize costs and enhance customer experience by switching to IP core networks such as Carrier Ethernet.

    

   Mass Market Adoption

   The future holds some real changes in the enterprise data communications segment as was seen with the robust growth of MPLS, and more so with Carrier Ethernet in 2010. Although MPLS has reached the mass adoption stage – growing by some 22.4 percent in 2009 – due to the widespread adoption by SMB and enterprise customers. Customers seemed to prefer Carrier Ethernet and MPLS over legacy technologies such as ATM, FR and Internet VPN (chiefly IPSec), due to the high quality of service, easy maintenance, and managed services offered. Further, Carrier Ethernet services have experienced rapid adoption due to superior speed, price, and flexibility.

    

   Reasoning

   Carrier Ethernet is rapidly emerging as a technology of choice in high-speed environments such as Telco core, data center-to-data center connectivity, trading sites in financial services firms, and between HQ and large regional offices in multinational environments. The Carrier Ethernet services market grew 27.2% in 2010. This robust growth rate is anticipated to outpace that of MPLS due to a variety of reasons:

    

   ·      Rapid data center consolidation and the need for high-speed connectivity to link regional offices with those data centers

   ·      Regulatory compliance-driven bandwidth increases for data center-to-data center connectivity

   ·      Simplicity and TCO advantages that Carrier Ethernet has over MPLS at high speeds

   ·      The self-managed nature of Carrier Ethernet that appeals to compliance-centric sectors such as banking

   ·      Dual coexistence of IP and TDM transport over Carrier Ethernet, as seen in products likwith pseudo-wire (PWE3) or psuedowire-Plus (PWE3-Plus), which is much-needed for T1 carriers’ voice circuits

    

   The Future

   Both these services will continue to grow and co-exist due to the unique value proposition they offer. MPLS services are expected to grow at a compound annual growth rate (CAGR) of 17.3 percent in the period beginning in 2009 and stretching out to 2016, while Carrier Ethernet services are likely to experience a CAGR of 24.9 percent during that same timeframe.

    

   Customers requiring scalability, low-to-medium speeds (2-45mbps), and managed services and connectivity to a large number of sites will continue to choose MPLS. Ethernet services will be popular among enterprises requiring high speeds (45mbps and above), and self-managed services and connectivity to a few sites.

    

   Throughout the next several years, core networks – those connecting data center to data center and data center to large regional offices – will begin switching to Carrier Ethernet, while smaller branch offices will continue to favor MPLS for at least another one to two years. In the short-term, most enterprises will use hybrid networks built upon a combination of Carrier Ethernet and MPLS. However, the long-term winner will be Carrier Ethernet as it offers lower TCO, higher QoS, clock source, service flexibility, easier management, and high availability across Asia Pacific.

    

   Now, with the immediate emergence of Ethernet First Mile (EFM) over Bonded Copper and/or Fibre Optic, we can see this will become the tipping point that will weigh the scales completely in the favor of full Carrier Ethernet networks providing a uniform platform from core to customer. We are already starting to see this change with the adoption and migration from legacy networks to full Carrier Ethernet in countries such as Indonesia, Malaysia, Thailand, Vietnam and many others.

    

   Sources: 

   IE Market Research Corp. (www.iemarketresearch.com)

   PT Telkomunikasi Indonesia 2009/2010 annual financial report

    

    

   Tony Sampano B.Sc MBA is VP/CTO at PT Kejora Gemilang Internusa (www.kejora.net) Mr. Sampano is a technocrat with more than a decade experience in Telecommunications Senior management positions within the Asia Pacific region.

    

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