Why Aren’t the North American Service Providers Selling More Ethernet over Copper?

Implications: 1.      Ethernet over Copper (EoC) evidently works and generates an 80 percent profit margin. 2.      Logically, the RBOCs should be cranking out the service a lot faster.   3.      The EoC vendors are optimistic that it will follow the same development curve, as was the case for DSL.

Analysis:  As far back as 1993, DSL worked.  In 1996, the RBOCs formed the Joint Procurement Consortium (JPC) and selected Alcatel.  By 1999, the supplier delivered a DSLAM.  By 2001, the RBOCs had figured out how to sell DSL.  And so the belief by the EoC vendors is that with being only 3½ years in, the RBOCs are just figuring out the EoC service right now.  

In terms of the backhaul application, the vendors are acknowledging that there is hesitancy in moving from T1 to Ethernet. Almost 90 percent of cell towers in the U.S. are served by T1s, largely controlled by AT&T, Verizon and Qwest.  The hope by the EoC manufacturers is that 2009 will be a mover year.  However, they acknowledge that the RBOCs are going to wait until there are guns to their heads – in effect, forced to move from TDM to Ethernet because of increased demand for bandwidth as well as to significantly reduce the cost per megabit.   

On a side note, there is a potential municipal market where towns and cities own their own copper or have access to it on some privileged basis.  But it would be kind of a long sell cycle.  Perhaps new EoC players such as ADVA and Turin could establish a niche position with the munis.