Twist in high-speed networking may create new battleground

The next battleground in high-speed networking is likely to bring the benefits of an office network to sprawling telecommunications layouts, lowering the costs of being in the communications business.

Cisco Systems, Extreme Networks, Foundry Networks and others are using their expertise in Ethernet, a popular technology used to connect PCs in the office, to come out with new lower-cost hardware that telecommunications service providers can use to offer fast Internet access at cheap prices.

"Applications, such as video streaming, are going to flourish," said Frank Robles, vice president of corporate development for Yipes, a start-up that offers cheap but fast Net service to businesses. "When the handcuffs were taken off with memory of computers, applications exploded. The same thing will happen with more bandwidth."

Today, most businesses are using Ethernet-based connections that run at either 10 or 100 megabits per second (mbps) or 1 gigabit per second (gbps). That is the speed that bits of information travel across a network. Networking companies and an industry standards group are in the midst of a two-year effort to boost Ethernet's speed tenfold: to 10 gbps.

With a new high-speed version of Ethernet in the works, networking companies hope to tap into a hot new service provider market, where start-ups, such as Yipes and Telseon, recently captured about $200 million each in venture capital funding. They are attempting to undercut more established companies by selling lines to businesses using Ethernet technology and optics, rather than more costly T1 lines.

The start-ups, which also include Cogent Communications and Intellispace, have been using Ethernet-based equipment that run at gigabit speeds. But with the higher-speed Ethernet, they can soon offer Net connections that are ten times faster. The extra bandwidth will allow them to offer new services, such as video-on-demand and storage of company data.

Even though the 10 gigabit Ethernet standard won't be finalized until March of 2002, analysts said most networking companies will ship products supporting 10 gigabit Ethernet in the second half of this year.

The networking companies will fight for a piece of the 10 gigabit Ethernet market that will grow from $71.4 million in revenue this year to $3.6 billion in 2004, according to analyst firm Dataquest.

Foundry and Extreme executives said their 10 gigabit Ethernet products will ship in the second half of the year. Cisco is currently showing prototypes of its 10 gigabit Ethernet technology to its customers.

Cisco executives declined to state when Cisco will ship products but did say the company plans to ship before the standard is finalized this spring. Networking executives said their customers can quickly and easily upgrade the early 10 gigabit Ethernet technology when the final version of the standard is released. That is a plan similar to what transpired when gigabit-speed Ethernet was introduced to the market in the late 1990's.

The higher-speed Ethernet products will be used to unclog congestion on corporate networks, providing the extra capacity needed for employees to perform bandwidth-demanding tasks on their computers, such as exchanging large files, conducting video conferences, or making phone calls over the Net.

But analysts say the new version will be most popular among service providers first, particularly start-ups that are using Ethernet-based equipment to offer faster high-speed Net access at cheap prices.

"It will initially be a carrier play," said analyst Ron Westfall, of Current Analysis. "This will allow them greater capacity to offer a wider range of Internet-based services beyond just Net access, like video services."

Eventually, traditional phone carriers that offer Net connections using older data networks will also switch to Ethernet-based networks, said Forrester Research analyst Charles Rutstein.

Ethernet-based network equipment serves as a cheaper replacement for other high-speed networking technologies that service providers have historically used, such as asynchronous transfer mode (ATM) and synchronous optical networking (SONET) technology, according to analysts.

Rutstein said he expects traditional phone companies, which have used the older networking technology in the past, will eventually start using the 10 gigabit Ethernet technology because it's cheaper. The 10 gigabit Ethernet technology runs at speeds that are comparable to the fastest SONET speeds, he said.

Networking executives say offices that have big appetites for network bandwidth, such as government labs, will also be among the first to buy the early products.

"We're talking early adopters this year," said Bruce Tolley, Cisco's manager of emerging technologies. "We've got energy companies who have to send large image files, people who do medical simulations of HIV treatments and need the fat 10 gigabit pipes."

Networking analysts and executives envision a future where Ethernet-based systems are everywhere, from corporate networks to the Internet.

Using Ethernet in both corporate and service provider networks will be cheaper and provide an easier network to maintain, analysts said. Service providers, for example, won't have to translate data from one networking protocol, such as Ethernet, to another networking protocol, such as ATM, while it travels to its destination, Rutstein said.

"That's a pain for service providers to have to translate on both ends," he said.