Covad Prepares to Launch Ethernet over Leased Line Access with 12-state Controlled Launch

| Sep 1, 2009 | Business Network Services - U.S. | Competitive Intelligence Report

| Analyst: Brian Washburn

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

Event Summary

September 1, 2009 – Covad is currently in a controlled launch of Business Ethernet Enterprise service, testing service packaging and price points in a dozen markets nationwide. The carrier's controlled launch has three tiers of Ethernet services for its Direct channel, 1 Mbps, 2.5 Mbps and 5 Mbps, available at rates from $259 per month for 1 Mbps service with a three-year contract up to $839 per month for 5 Mbps service with a one-year contract. The carrier is making the service available to clients in its Wholesale channel as well in increments of 1.5 Mbps, 3 Mbps and 6 Mbps.

Analytical Summary

• Current Perspective: Positive on Covad’s initial Ethernet service launch because, though the services are still in a controlled launch, the carrier demonstrates the ease of rolling out the new service thanks in part to its network upgrades (see ?Covad Launches Nationwide MPLS Network, Laying the Foundation for New Wholesale Services , February 25, 2009). Covad's launch relies on a more conservative approach of Ethernet over leased lines, which comes in with lower price/speed points, but has a high level of reliability compared to bonded DSL-based Ethernet over copper.

• Vendor Importance: Moderate to high to Covad, because IP- and Ethernet-layer services are displacing traditional telco frame relay, ATM and leased circuits. Covad needed to add an Ethernet access strategy to have a complete portfolio to offer its service provider partners: Internet and Internet/Ethernet access, and secure access for the Layer 3 IP-VPN and Layer 2 Ethernet services developed and sold by Covad partners.

• Market Impact: Moderate on carriers offering copper-based access services, because once the service is launched, Covad can deliver Ethernet over leased line access to its thousands of central offices nationwide, making it available both to its service partners and to their competitors. Though Covad's controlled launch is limited to a dozen markets initially, enabling Ethernet service mainly required updates to back-office systems instead of changes in the network – making it simple to expand the service once Covad chooses to do so.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• Large incumbent telecom service providers – from AT&T and Verizon Business to aggregator Hughes Network Systems – can look at Covad Business Ethernet Enterprise as a potential ally, and can explore selling Ethernet as an access option to their customers. Competitors already heavily invested in long-haul Ethernet services, including XO, tw telecom and Reliance Communications, should be working with Covad during its controlled launch to conduct technical trials that connect their Ethernet infrastructure to Covad's Ethernet access services.

Recommended End User / Customer Actions

• Covad's Business Ethernet Enterprise is currently still in a controlled launch. Though it is available to customers in select metros, it is not yet available in most of the service provider’s markets. Customers interested in Internet service delivered via Ethernet access can contact Covad now to place their order, helping to demonstrate to the company that there is demand for the service.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Business Network Services - U.S. | More information

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