Normally an upbeat fellow, CENX CEO and founder Nan Chen was positively effusive last month when the number of connected locations reached by his start-up Ethernet exchange passed the 10 million mark.
“We’re ahead of schedule,” Chen told VON/xchange in a phone interview. “We didn’t know we’d reach this milestone so quickly – we thought we were probably one year away. We’re very pleased see this moving forward so quickly.”
The explosive growth of Ethernet services offered by carriers has ushered in a new type of interconnection service as well, as startups like CENX and established data-center/colocation providers like Telx and Equinix scramble to set up Ethernet exchanges. Designed to solve the growing problem of Carrier Ethernet interconnection, such systems offer one-stop locations where multiple carriers can exchange Ethernet traffic, avoiding costly one-off bilateral exchanges and multi-operator “voice tandems,” which typically charge on a per-minute basis.
CENX became the first prominent Ethernet exchange provider in late 2009, when it opened its first three carrier Ethernet exchanges, in Los Angeles, New York City and Chicago. In March the company added voice traffic to the data traffic already flowing through its exchange.
The model is a powerful one, said Gabe Venturi, VP of sales at Intellifiber Networks, which said on July 7 it is joining the CENX exchange. “CENX has done a great job in getting everyone to table; now it’s time for us to play on the playground.”
Upfront Fees Drop
Driven by rapid growth in demand for mobile backhaul, video, virtualization and other high-bandwidth applications, Carrier Ethernet will grow at a rate of 24 percent per year through 2015, according to analyst Rosemary Cochran, a principal with Vertical Systems Group. Infonetics Research reported last year that the ability for service providers to quickly and economically interconnect with their peers could add as much as $4.7 billion to the global Ethernet revenue forecast in 2013, reaching nearly $39 billion.
CENX competes with data-center and colocation providers such as Telx and Equinix, who have recently said they will open Carrier Ethernet exchanges at their facilities. Watching the rapid growth of carrier Ethernet services, many of these providers see such exchanges as a way to drive revenue while keeping up-front per-port charges low. Neutral Tandem, a provider of voice and data interconnections to operators, has also announced a new Ethernet exchange.
Typically, a carrier pays a recurring per-port charge to be a member of the exchange, plus transaction fees when they make an actual virtual connection with another carrier. Exchange providers have not publicly divulged their fees, but industry sources say that a typical per-port charge could be in the $1,000-$2,000 range, while connection fees range from $10 to $50. Upfront fees will likely drop, possibly to zero, as multiple exchanges vie to add carrier members.
