Around 18 carriers now connect to CENX, says Sandy Brown, the new CEO of the first carrier ethernet exchange. The technology will dominate corporate services within a few years
Sandy Brown: former AT&T executive has taken over as CEO of
CENX, the world’s first carrier-neutral carrier ethernet exchange
CENX, the operator of the first carrier ethernet exchange, has hired former AT&T executive Sandy Brown as its first CEO. The decision marks the next stage in the development of a project that aims to create a business that some believe will be worth $40 billion by 2013, as carriers and their enterprise customers switch to ethernet technology for their long distance and international links.
“It’s a pretty exciting time,” says Brown, whose appointment was announced in early July. “We’re at the beginning of a pretty significant transformation of the industry.”
CENX — Brown and others in the company pronounce it “see-nix” — was created by a group of evangelists for carrier ethernet, notably Nan Chen, president of the Metro Ethernet Forum, which is advised by the venerable Bob Metcalfe, inventor of ethernet back in 1973.
It has taken most of the subsequent 37 years to get ethernet out of the office and under the streets, into metropolitan networks; and the next stage — inter-city and international networks — is starting to emerge now.
“Ethernet is generally cheaper, more cost effective in equipment terms and cheaper in cost per bit transmitted,” says Brown, days after his appointment. “And it has better scaling.” You can go from 10 megabits a second to one gigabit a second “with typically no hardware changes”, he says.
More people are familiar with ethernet technology than with traditional telecoms protocols, he adds: remember, it is a networking technology that has been in virtually every office in the world for three decades. Every in-house IT department has people who understand ethernet and work with it daily. “Ethernet is a better solution for businesses as they grow,” he says.
Chen, co-founder and president of CENX, welcomed Brown’s appointment: “Sandy brings extraordinary operational experience and a shared vision of the profound changes and challenges carriers face as ethernet rapidly becomes the dominant technology for service delivery.” Chen was a speaker at Global Telecoms Business's Innovation Summit in June 2010: http://www.globaltelecomsbusiness.com/Article/2592459/Search/Results/Innovation-is-the-key-to-new-revenue-generation.html
So what is CENX? It is an imaginative bid to do in the ethernet telecoms world what has been standard in traditional TDM telecoms almost since the industry started. No one wonders that a call from Anne to Bob may travel through the networks of two, three or four telecoms operators, depending on where Anne is and where Bob is.
Matching networks with customers
Ethernet operators are focusing on winning business from large corporate customers. “Our role is recognising a basic reality,” says Brown. “Carriers want to provision customers on their own networks, but customers’ needs and carriers’ networks don’t always match.”
Because of this, “carriers need a good way of buying offnet services”. If a carrier can provide ethernet connections to nine out of 10 of a customer’s locations, it needs to recruit a competitor to provide the tenth link.
But how does it connect? That’s the role of CENX: it is building a series of carrier-neutral ethernet exchanges, places to which a number of competing carriers will connect. “The exchange makes it easier for customers to connect,” says Brown.
“Customers” in this sense are operators, the approximately 18 carriers — Brown is guarded about giving the exact number — that have signed up and connected into CENX. The company itself “doesn’t make any announcements” about members, said an official.
However it is known that Verizon is connected: the carrier’s Quintin Lew and CENX’s Chen were presented with a Global Telecoms Business innovation award in June 2010 in London for their work on the project.
Interxion, which provides co-location data centre services in Europe, announced in April 2010 that it would connect from June. RCN Metro Optical Networks, a US carrier, has also announced that it has become a member, as have Optimum Lightpath — a metropolitan New York carrier — as well as Level 3, XO and others.
Ethernet service translator
Each connects through a one-gigabit or 10-gigabit pipe, and the CENX equipment has a service translator, that does its best to map carrier A’s offerings to those that are available from carrier B. This is a complex process: “A few things are a little problematic,” admits Brown.
The relationship between any two carriers is negotiated between those companies: CENX does not arrange to business, just facilitates it in its equipment. “CENX is a marketplace. It allows the business to work more effectively,” he says. End-users, the multinational corporate companies, do not have any direct relationship with CENX.
The company is also developing a set of online tools for operator members, including a system that allows them, if they want, to put details of their network inventory online. So operator A, looking for a network that will deliver that tenth location to its corporate customers, can search through likely candidates before talking to them, and then arranging an interconnection via CENX with the one offering the best deal.
“We don’t get in the middle of the business transaction,” says Brown. It’s up to member companies to decide what locations to offer, if any, via the online system, and they can show the different service types that are available.
They can offer the data in “pretty much any form”, he adds — via a list of geographical areas, a list of administrative areas, a set of polygons on a map, or a file listing buildings or zip codes or postal codes served. “It depends on the strategy of each carrier. Some are more building oriented, and others are more geographically oriented.”
CENX will earn its revenue from three sources, he adds: it charges for each initial connection; there is a service cost for connections; and there is a speed-related cost. The inventory service “is part of the deal”.
London and Hong Kong
CENX started in the US with hubs in New York, Los Angeles and Chicago, and it has opened its first hub in Europe, in London. “Hong Kong will probably be next,” says Brown. “And we will have one in Miami for South America.”
Now, the company has “a very aggressive build-out plan to grown from six to 20 locations by the end of 2011”, he says. “We are driven by our carrier customers.” CENX is aiming at “the major European telecoms areas and the Asia Pacific region”.
So who funds CENX? “We don’t talk about the investors,” says Brown. “It’s backed by some really extraordinary folks.”
Chen is clearly one. He has a track record of start-ups, including Atrica, which Nokia Siemens Networks bought at the end of 2007. But for any detail, the CENX website has nothing to say and Brown has little more: “These are not dumb money investors,” he says. “They have a vision about where CENX could be. It’s very much a shared vision.”
CENX and Verizon’s submission to the 2010 GTB Innovation Awards gave some background. “CENX, Verizon and other service providers developed the carrier ethernet neutral exchange model for two years. The first carrier ethernet exchanges became operational in October 2009 in New York, Los Angeles and Chicago,” it said. CENX and Verizon started to work together in 2008 but their partnership was not announced until January 2010.
The submission added: “CENX and Verizon also worked closely with several large service providers to create an innovative approach to provided scalable global growth for carrier ethernet.”
Says Brown: “Carriers have been interconnecting for ages, but they used different approaches. What changed was when ethernet crossed a couple of thresholds. Carriers are starting to buy and sell ethernet at some scale.”
And so there is a need for CENX to interconnect services in a carrier-neutral location. CENX does not provide its own long-distance services, he emphasises: it does not compete with the companies that connect to it.
Having started at the start, CENX can only get bigger as ethernet grows, thinks Brown. “Over the next five years the vast majority of new circuits will be ethernet access end to end,” he says. Vast majority? “Yes, 80-85%,” he adds.
Analysts certainly agree with the potential for carrier ethernet revenue, suggesting it will be nearing $40 billion in only three years.
Access to capital
So how much has CENX available in resources? Just as with the related question about investors, Brown did not want to give detailed answers. “We are working with very significant investors,” he says. “Access to capital is not a challenge. As we grow, that will enable us to grow.”
CENX is still a small operation, with around 30 full-time staff. It uses other companies’ locations. “We are not in the real-estate or co-location business. Our investments are in systems and tools.”
He is unwilling to say whose kit the company uses: “Our switches are best of breed, industry grade products”, he says. “Our partners need to be assured that it’s carrier grade.”
In late July 2010 Canadian OSS company Exfo announced that it had an agreement to supply equipment to CENX to monitor service level agreements of offnet connections — the sort of thing companies connected to CENX will need in order to reassure their end-user corporate customers.
“We’re building our own system processes,” says Brown. Partners “need to be assured that it’s carrier grade. Carriers have to be able to certify the services that they offer to others.”
Brown himself comes from a solid telecoms background, having worked for Bell Labs — when it was part of classic AT&T — and then AT&T itself for most of his career. “I worked on PBXs at Bell Labs a long time ago,” he says. He spent the first half of his career working with equipment, including PBXs and fax machines, and the second on services — “predominantly data networking, including getting AT&T into the internet”. His last AT&T assignment was as a vice president, responsible for multi-billion dollar lines of business including its carrier ethernet services.
But his conversion to the ethernet cause “began a long time ago”, he recalls: back when he was “in PBX world and local area networks were just getting started. I realised ethernet was going to be an alternative way of communicating. It was clear then that it was a long way out, but you could see that it was coming.”
Since then, ethernet has progressed from being a technology for local area networks, for which it was primarily designed by Metcalfe and his colleagues. At the time, back in the late 1970s and early 1980s, there was great controversy about which of half a dozen local area network technologies would win. “We know who the winner is now,” says Brown. GTB
Nan Chen of the Metro Ethernet Forum and co-founder of CENX at the GTB Innovation Summit, June 2010: http://www.globaltelecomsbusiness.com/Article/2592459/Search/Results/Innovation-is-the-key-to-new-revenue-generation.html
First GTB report about CENX: http://www.globaltelecomsbusiness.com/Article/2441141/Search/Results/Industry-prepares-for-IP-and-carrier-ethernet-services.html