Carrier Ethernet 2.0 – The Road to Higher ARPU During Interesting Times

By ANDA Networks’ Greg Gum

The recent problems of the financial markets bring to mind an old Chinese proverb and curse: “May you live in interesting times.” Given the recent financial market crises, the coming months will certainly prove to be interesting for the telecom service providers as well. Here are a few thoughts on how the financial climate will impact the carrier market and what strategies will be employed in these “interesting times.” Here are three trends we think you’ll see:

1) Manage Free Cash Flow Mantra: Telcos and MSOs increasingly will be on the warpath to minimize new CAPEX and OPEX costs for any new builds unless the revenue is clearly and quickly visible for ROI or in their existing network footprint. Typically, if a customer’s locations are not all “on-net,” a business case will be required for any new build-out (unless of course you are a presidential candidate) and is frequently referred to as “success-based build.” With large residential builds ongoing such as U-Verse for AT&T and FiOS for Verizon, coupled with the recent financial market crash, managing free cash flow becomes a strategic imperative with any service provider in these trying times. So how will carriers continue to grow top-line revenue while tightly managing cash outflows?

2) ARPU based Services: Several strategies which will be employed by service providers involve increasing Average Revenue Per Unit (ARPU) from existing customers and network footprints, thus minimizing new CAPEX builds. By offering new value-added services on top of their existing base of Ethernet services such as managed VPN, different SLA classes of service, and security, carriers are effectively mandating the move to Carrier Ethernet 2.0 rather than becoming “just a commodity bandwidth big dumb pipe provider” to meet those challenges.

3) Ergo Carrier Ethernet 2.0: Carrier Ethernet 2.0 enables service providers greater control of their networks, which in turn gives customers more tailored bandwidth-intensive services, such as VoIP, and video traffic or even customer specific applications such as high SLA-managed SAP traffic as an example, all over increasingly higher speed Ethernet services. Carrier Ethernet 2.0 adds the operations, administration and monitoring (OAM) features that enable service providers to deliver these new revenue-enhancement services with high QoS (quality of service) and stronger SLAs (Service Level Agreements).

Although businesses are expected to be very careful with their spending, ARPU services enabled using Carrier Ethernet 2.0 can provide overall savings to the customer. For example, while a service provider can charge its customer for a videoconference with a customer, the cost is likely to be significantly less than an in-person meeting. Moreover, an SLA to ensure the video quality and availability is a small price to pay relative to the overall total cost of the service.

A key attraction of offering ARPU services using Carrier Ethernet 2.0 is that the service provider can leverage existing infrastructure without a significant investment in CAPEX. Moreover, new services can be rolled out on a “Build as You Grow” basis.

To that end, equipment providers are building OAM capabilities into their equipment. ANDA Networks’ products now include new advanced operator-focused OAM features, such as providing fully protected circuits during maintenance and repair windows or in the event of link failures using G.8031 1:1 protection in times well under the 50ms standard. Enabling these feature functions for our service providers with the tools to provision and bill end-to-end protected services remotely will enable new Carrier Ethernet 2.0 based network functionality for increased ARPU based service offerings. These capabilities can significantly accelerate service delivery, which to a service provider, is synonymous with faster time to revenue to enhance their overall cash flow position in these tumultuous but interesting times

Greg Gum is vice president of marketing and business development ANDA Networks, a provider of carrier-class Ethernet solutions to service providers.