XO Launches National VPLS Ethernet with Integrated MPLS and DIA

Event Summary

June 24, 2010 – XO Communications launches XO Ethernet VPLS nationwide. The service, available at bandwidth options from 3 Mbps to 1 Gbps, interworks with the carrier's dedicated Internet access and MPLS IP-VPN services, delivered on the same Ethernet circuit. XO Ethernet VPLS aligns the same four class of service (CoS) tiers (Real-Time, Critical, Priority, Standard) and accompanying SLA performance guarantees with its MPLS IP-VPN service. The VPLS offer is priced at one port-based flat rate across all services and CoS tiers. A wholesale offer is in development for release later in 2010.

Quick Take

Analytical Summary

• Current Perspective: Positive on XO's national VPLS launch because the provider focuses on one price for converged Ethernet, IP/MPLS VPN and DIA services across all CoS. For customers maintaining multiple networks and concerned about the costs associated with these networks, XO's simple approach can incorporate all of a customer's enterprise network needs without extra charges. XO will find some enterprise opportunities, but it may find the VPLS NNI opportunity even greater once it extends its enterprise offer to wholesale.

• Vendor Importance: Moderate to XO, because the carrier already had put the components in place to launch a multi-service edge that includes VPLS. AT&T and Verizon Business outsize XO; closer to its weight class and footprint are rival and experienced VPLS competitor Level 3, also well-experienced VPLS competitor tw telecom, and Qwest's soon-to-be-completed multi-service national core infrastructure strengthens their competitive position.

• Market Impact: Moderate on VPLS Ethernet competitors, because many of them are much larger than XO and have a global presence; XO launches as a U.S. specialist. XO will need to skip global VPLS bids and focus on domestic opportunities. But very large enterprises have been most interested in VPLS to date; there XO will be challenged to unseat the big incumbents, even to win contract portions as a secondary provider.

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