Romulus Pereira is chief executive of Riverstone Networks, a vendor of metropolitan Ethernet equipment. He believes that Europe's incumbent telecoms carriers are currently at a critical juncture, faced with the need to upgrade their ageing infrastructure to support a raft of new wide area network (WAN) services demanded by companies.
"Access networks are frame relay- or ATM-centric and voice-orientated now, but need to move either to an MPLS [Multiprotocol Label Switching] over Ethernet or SDH [Synchronous Digital Hierarchy] point of view to deliver next-generation data pipes. They will have arrived at this point [of having upgraded] by somewhere around the middle of this year," says Pereira, although he stresses that there are still a number of regulatory and other challenges to be overcome.
The telecoms carriers cannot simply turn their legacy customers off, upgrade, and then turn them on again later. A lot of the Ethernet build-out must co-exist with legacy systems, though the carriers will reduce those legacy connections over time and switch them over, says Pereira.
"Take the example of a bank with 50 sites running a private frame relay network. If I were a telecoms carrier, I would gradually migrate users to an Ethernet model, starting off by making it more cost-efficient, but also bumping up the bandwidth to 10Mbit/s," says Pereira. "I would give it first to corporate headquarters rather than the branch offices, and then I would migrate the other sites over time."
Carriers such as BT in the UK and Telefonica in Spain have already started to put MPLS into their access networks, and are now talking about migrating their biggest corporate customers to IP-based virtual private network (VPN) or extranet links.
However, Pereira believes that to make money they will have to do more than simply provide bandwidth.
"The carriers are saying that playing a bandwidth pricing game is not sustainable. They have to find a service model and it has to come out of the business enterprise market. They need to take somebody's server farm and put it in a datacentre somewhere, then wrap other services around that bandwidth, such as data recovery, back-ups, storage or application hosting," he argues.
Pereira believes there are also opportunities for carriers to capture outsourcing business, a course that could see them partner with more established systems companies such as IBM.
"Telecoms carriers don't know how to do tiered services, or promote and sell them. They will partner with other firms that are better at it," says Pereira.
Some of the telecoms carriers that started to build out MPLS over Ethernet and end-to-end IP-based telecoms networks from scratch have disappeared over the past few years. But Pereira is impressed by the level of financial and regulatory support given to Europe's incumbent carriers to help them stay in business.
"[In Europe] there's a close partnership between the telecoms operators and the financial community," says Pereira. "They are all intertwined and there is a willingness to take a longer-term view. Unlike in the US, where the capital market reigns supreme, European governments play a much more mediating role."
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