tw telecom Tops Vertical Systems Group 2012 U.S. Competitive Provider Business Ethernet Leaderboard

CEN Feature (Mar 7 2013) Vertical Systems

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   Seven competitive providers have made it onto Vertical Systems Group’s new 2012 Competitive Provider Business Ethernet Leaderboard, which measures the billable retail Ethernet ports sold to enterprise customers, according to Rick Malone, principal of the Boston-based research firm. It is one of three new Leaderboards that Vertical is introducing this year. 

   “Our new U.S. Ethernet Provider Leaderboards reflect a robust competitive ecosystem, which has three major segments – Incumbent Carriers, Competitive Providers and Cable MSOs,” said Malone. “The healthy 24% port growth in the U.S retail Ethernet market in 2012 expanded the installed base to a level where we were able to calculate more granular statistically significant shares. Achieving a Leaderboard rank is important for Ethernet providers because it is a quantitative indicator of actual market presence, which is in contrast to idiosyncratic industry awards that can be obtained for a price,” he added, referring to certain subjective awards offered by some analyst firms. 

   The Cable MSO Leaderboard was the first to be released in late February. Incumbent Carriers are next.

   tw telecom has a significant lead over all seven companies on the Competitive Provider Leaderboard. Level 3 and XO, which are ranked second and third places respectively, are “neck and neck,” said Malone. Rounding out the group in rank order are: Cogent, Zayo, Reliance Globalcom and Integra Telecom.  

   tw telecom is leading the pack because the company was early to market and has grown at a steady pace. tw telecom also has an advantage because it uniquely offers customers the ability to dynamically control and manage the amount of bandwidth they use, explained Malone. The provider also operates, or connects to, a large number of data center facilities. Customers use tw telecom’s Ethernet services to access cloud services at those data centers, he added. 

   “tw telecom helped shape this market by making a big commitment to Ethernet early on,” said Malone. “The company also has a lot of great partnerships with its competitors.”

   Yipes, another early Ethernet leader, was acquired by sixth-ranked Reliance Globalcom in 2007. However, the India-based company has not invested heavily in its U.S. business, resulting in some share erosion, said Malone.

   Second-ranked Level 3 has increased its footprint through a series of mergers and increased its sales to enterprises over the past year. However, the company sells more wholesale Ethernet ports at present, he explained. Similarly, XO had a lot of port growth in 2012, but also sold more wholesale ports.

   “XO has a very competent and price competitive Ethernet over Copper product with a variety of speeds ranging from 3 Mbps to 100 Mbps,” Malone added. 

   Holding fourth place is Cogent, which has been jumping on and off Vertical’s main Business Ethernet Leaderboard in recent years. Cogent provides its customers with a lot of dedicated Ethernet access and Ethernet Private Line (EPL) service. The company operates a stable Ethernet business with high reliability and has a good percentage of wholesale ports, said Malone.

   Fifth-ranked Zayo and seventh-ranked Integra are very aggressive Ethernet providers seeking to become major players. Zayo’s acquisition of AboveNet, and its fiber-focused strategy, allows Zayo to provide very high-speed dedicated Internet access, private line and mesh services to customers, said Malone. 

   Despite its relatively smaller footprint, seventh-ranked Integra is “doing all the right things,” he said. The company, which provides services in 11 western states, doubled its billable Ethernet ports in 2012.

   “Integra had a great year in the markets it serves and we expect the company to move up this Leaderboard,” said Malone. “The company is a price leader and sells a high volume of virtual private line connections.”

   Of all the services that Vertical Systems Group tracks for its Leaderboards, the fastest growing service is Ethernet access to IP VPNs. Many of the competitive providers offer their own IP VPN services, while others offer access to services from partner vendors, said Malone.

   Competitive providers typically have a larger target market than the Cable MSOs. They also compete against each other more than the MSOs do, and they go after small businesses that the MSOs are unable to serve. They serve large and global enterprises and vertical markets that the Incumbent carriers serve, said Malone. Competitive providers also are able to offer better prices in some areas, and they do not have to cannibalize their own services like the Incumbents often must do when selling Ethernet to their customers

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