KPN Advances All-IP Strategy with Multi-service Carrier Ethernet Product

| May 7, 2007 | Business Telecom Services - Europe | Competitive Intelligence Report

Analyst: Dustin Kehoe

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

On May 7th KPN introduced a new carrier Ethernet product based on the Juniper M320 multi-service switching platform. It is geared to support both Layer 2 and Layer 3-based services across a single platform. The solution is available across the Benelux region, France, Germany and UK. Access speeds range from 10 Mbps to 1 Gbps, and it supports classes of service (CoS).

Analytical Summary

• Current Perspective: Positive on KPN’s launch of its integrated carrier Ethernet product as KPN can now offer a migration-friendly, multi-service platform supporting both Layer-2 (L2) and Layer-3 (L3) Ethernet services. This means that customers no longer have to deploy separate networks and provides more flexibility for KPN to build hybrid solutions across both architectures.

• Vendor Importance: High to KPN as it needed to offer L2 and L3 Ethernet capabilities across a multi-service platform in order to offer customers cost-savings (i.e., they no longer require separate networks) and flexibility to deploy innovative solutions. The new carrier Ethernet offer was also important for advancing KPN’s All-IP vision by collapsing networks and offering a single platform to support all services. While customers benefit from cost-savings and flexibility, KPN can generate new revenue streams for differentiated services.

• Market Impact: High on the Dutch business market as KPN’s business proposition is to support primarily the international requirements of its core domestic customers. On the one hand, COLT and Interoute are perhaps the strongest competitors for carrier Ethernet services. On the other, KPN has the customer relationships, large installed base, and a high demand for Ethernet services. The move will force competitors to reconsider their strategy for Ethernet services and respond accordingly.

Recommended Competitor Actions

• COLT should stress that it can also support Ethernet services across both L2 and L3 platforms, and offer point-to-point and any-to-any topologies. It should also highlight that it has a mature product range that has been on the market much longer and has an extensive installed base.

• Interoute should point out that it can offer Ethernet services in 17 countries, which is far greater than many pan-European operators with faster speeds (e.g., options of up to 10 Gbps), burstable bandwidth (up to 1 Gbps) and usage-based billing. The company could also point to its vast city ring network, a string of partnerships, ventures and acquisitions that is carrying the network well into Eastern Europe and the Middle East.

• While BT and Orange Business Services do have some Ethernet products, they should also continue to develop their Ethernet product portfolio. The technology has a lot of advantages in terms of speed, price and provisioning times that customers are no longer willing to ignore. AT&T for its part should begin looking at other ways to expand its Ethernet product, other than just an access technology, to support its customers.

• Verizon Business can also point out that it has an extensive MAN 56-city infrastructure for deploying Ethernet services in Europe and point out recent moves to increase its country coverage for the Ethernet Private Line service. The carrier should also consider offering a multi-service platform supporting the L2 and L3 architectures and consider the business case for bringing VPLS to Europe as a standard service. Many competitors appear to be turning in this direction.

• In general, VPN providers must take notice of both the threat and opportunity carrier Ethernet holds in the European market. If one considers the Asian market as an industry indicator, Ethernet services in both the access and L2/L3 transport will be ubiquitous in Europe in the 2008-2009 timeframe. Ethernet services, as an access technology is gradually phasing out demands for leased lines, DSL and SDH in Europe.

Recommended End User / Customer Actions

• Enterprise customers should consider KPN’s carrier Ethernet services. The company offers support for both L2 and L3 services, which offers customers a lot more flexibility and cost-savings than what was possible before. While the service is offered standard in six European countries, it has provided bespoke solutions for some customers with global requirements. In comparison to some operators, KPN appears to be more open to this approach.

• Customers looking for Ethernet services should also consider COLT as a strong contender within its 13-country footprint. COLT also has a large installed base with over 1,700 customers and a mature product portfolio. Customers should also look to Verizon Business as an ‘up and comer.’ The company has a global strategy for Ethernet, extensive infrastructure in Europe, and good product roadmap. This is enough firepower to be very threatening to other carriers competing in this space.

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