Give businesses a big data pipe and they’ll find a way to fill it. At Lightpath, we can certainly testify to that adage. No sooner did many of our customers cross the 1 gigabit threshold and they start getting hungry for even more bandwidth. In fact, sales of 10G Ethernet lines to our customers nearly doubled in 2013 versus the year prior.
There was a moment when it seemed the next bandwidth jump would be to 40G.
While the industry is still in the early stages, it’s become clear that we’re moving full steam ahead to 100G. Deployments have already begun. Just this past March, Lightpath announced that a media and entertainment company is using our 100G optical transport service to move large volumes of video. Across the industry, deployments will continue to ramp up as demand for ever more bandwidth increases.
So where is the demand for these high-bandwidth services? From our perspective, serving mid-sized and large businesses in the New York metro area, the need is heaviest in the financial and market data services, education, media and healthcare verticals. Some needs are driven by throughput requirements, others by a mass influx of devices on the network.
What’s clear is that we’re not turning back, and there are more use cases for higher-bandwidth services coming to light every day.
Today, 10G Ethernet is either being deployed or heavily evaluated by an increasing number of businesses, with most decisions being financially motivated. In many cases, these customers are maxing out their 1G networks.
When they check on the cost to upgrade, they find that it can be cost-effective to increase all the way to 10G instead of continuing to increase bandwidth in 1G increments. Today, customers will typically opt for 10G if they find that they have a need for more than 2G. This started happening more frequently when the cost ratio hit 5:10 (e.g., it was more cost-effective to buy one 10G line than five bonded 1G lines). For businesses with increasing bandwidth needs, having this amount of headroom in the network puts them in a very comfortable position. Of course, they know by now that another upgrade is in their future, but this buys them some time.
The economics of going from 10G to 100G are improving, which is driving initial deployments.
To be sure, the costs still need to come down to really support mass adoption. But the demand for multiple 10G lines signals that it is just a matter of time before more businesses take the leap to 100G en masse, especially as the costs for the equipment that powers the service continues to drop.
To understand what is driving adoption of 10G and 100G services, it is important to understand how businesses and organizations are changing. In our discussions with financial and market data services, education, media and healthcare verticals, we’re hearing about businesses and markets that continue to transform. While they are each facing unique challenges and pursuing distinct opportunities, they share common ground in that they are looking for more bandwidth to support them.
In the education market, school districts often build out their network in a hub and spoke architecture. In this scenario, the entire district’s files, services and primary Internet connection might be hosted centrally at one location, such as a high school.
Every other school in the district that connects to that high school needs a line that supplies enough bandwidth to support their individual school’s Internet needs, remote storage access and more. The need for high bandwidth services in this market has ballooned as more schools introduce BYOD and “one-to-one” initiatives that are resulting in a mass influx of new devices operated by kids who are experts at gobbling up data.
Larger districts that are supporting these kinds of programs for thousands and thousands of students are starting to find that 1G just doesn’t cut it anymore. Especially as they make increasing use of video conferencing for remote learning and cloud-based education services. We recently had an education customer that placed an order for a 1G line.
Before we even had a chance to deploy, they called us back saying that they’d need to go higher. In our conversations, we’re hearing that while the education market has some serious bandwidth needs, they are likely years away from seriously considering 100G.
This is not the case for financial and market data services companies, which tend to be early adopters when it comes to telecom data services. They were some of our first customers of 10G services and are considered to be 100G early adopters.
Most of our customers in this market place a high value on throughput. If they can get or receive information even microseconds faster than before, they can leverage that as a competitive differentiator.
As the amount of data that financial and market data services companies exchange increases, higher-bandwidth services provide the headroom that lets them maintain the high speeds they need to compete. After all, if the pipe is bigger, more concurrent data streams can fit, reaching their destination more quickly than they would on a lower-bandwidth line. This is part of the reason why 10G took off so early with this market versus bonded 1G lines. Total throughput is better on a dedicated 10G line that can support larger data streams. As the streams get even bigger, the same case will be made for 100G.
If there is any vertical giving financial services a run for its money on the 100G demand front, it is media and entertainment.
In a recent report, Dell’Oro Group estimated that sales of dense wavelength division multiplexing (DWDM) gear would reach $15 billion by 2018, driven in part by the need to support video services.
As service providers support more video over IP to deliver content to any device, and as subscriptions for over the top video services go through the roof, offering lots of content at the highest quality means having a big pipe. The world’s largest media hubs are seeing more and more 100G lines deployed to support the transport of bandwidth-hogging content between facilities. A great example of such a market is the New York metro area, where Lightpath calls home. In the tri-state area, 100G is already a reality for some of the players in this market, and you can count on them to be neck and neck with financial services when it comes time to make the jump to yet another tier.
The healthcare market is undergoing a few major changes that are driving uptake of 10G. Right now, especially in the region we serve, there is continued consolidation of hospitals, which are also acquiring smaller medical practices. The volume of high-res imaging and remote video that they need to support across locations continues to increase. That in itself begs for 10G. But add to that ongoing deployments of electronic medical records systems and increased usage of off-site data centers to support business continuity and disaster recovery requirements, and the need for bandwidth is clear. Like education, it might be at least a couple of years before this market starts talking about needing 100G, but they too will get there.
It’s Not The Bandwidth, It’s How You Deliver It
There are some differences in enabling networks, but for the most part, when it comes to 10G or 100G services, the core bandwidth provided performs similarly upon commissioning from one operator to another. However, the services, network and care that operators put in place to monitor and support the offering is truly what differentiates these services in the market. When customers buy, they’re most interested in hearing about whether the service is delivered unprotected, protected or diverse, and what the underlying latency is. They’re also interested in how the operator will respond if support is needed. These factors involve implementation strategies, SLAs and how quickly a problem can be resolved upon a fault or service degradation. If a trouble issue does arise, another key area of importance for customers is to receive a meaningful and factual explanation as to why the outage happened and what will be done to stop it from happening again.
Of course, reliability and performance are top of mind for any customer relying on data services to drive their business.
To this end, everything from network design to network management policies and proactive monitoring are each important.
Reliability also hinges on a strong underlying transport technology. This is why operators that are leading in the delivery of 10G and 100G services largely turn to wavelength-based solutions when provisioning these offerings.
Operators also choose wavelength- based solutions because of the predictability and flexibility they provide.
For instance, wavelength can be deployed as a dedicated, unshared service between two locations, versus technologies like packet switched that require shared transport. As a result, security and guaranteed bandwidth are assured. This predictability is also conducive to predesigning a route in a way that eliminates points of failure and gives early visibility into what latency will be on the line.
Operators use this to their advantage to design premium low latency routes that are leveraged for critical applications, such as high frequency trading.
Finally, wavelength technology makes use of passive optical gear, which is typically more cost-effective to deploy for high bandwidth solutions when compared to alternative switch-based solutions. This also further contributes to the minimization of overall overhead and latency associated with the transport. For this reason, wavelength-based solutions are also being used by latency-sensitive protocols beyond Ethernet, such as Fibre Channel and applications like HD Video that are sensitive to jitter.
100G Here We Come
Just as it has made economic sense to go from 1G to 10G instead of stepping up in continued increments, that day will come soon for 100G. When it does, even more businesses will have found that they have a need. Given how eager everyone was to bypass 40G, it’s a safe bet that by then, we’ll be discussing the latest 1 terabit deployments.