1. McAdams -- GEF1 Opportunity and Necessity Gigabit Ethernet over Fiber (GEF) June 2002 Prof. Alan K. McAdams Cornell University akm3@cornell.edu

2. McAdams -- GEF2 First Generation CA*Net1 was an ATM network Based on the commercial offering of Telco-based Technology in a pre-DSL era

3. McAdams -- GEF3 Second Generation A simple network –CA*net2 was IP over ATM over SONET (making IP the only protocol) the first implementation of a nationwide IP-only network –The cost of the network was “astoundingly” lower than any prior implementation of a nationwide network (see below) –The IP-only concept was then spread to research and education institutions with a need of interconnecting sites across a metro network to a Gigapop Elsewhere, Ethernets were evolving within enterprise organizations’ R&E LANs at increasing bandwidths -- soon reaching Gigabit levels The intersection of the IP-only network and the Gigabit Ethernet LAN soon demonstrated the enormous enhancement brought forward by Ethernet as a transport mechanism through its interaction with optical fiber

4. McAdams -- GEF4

5. 5 Third Generation CA*Net3 was IP over PPP over point-to-point SONET –Removed the need for ATM –Removed the need for SONET ring resiliency Repeat: Bill St-Arnaud, “We were astounded by the cost reduction in orders of magnitude” [by optimizing for the transport of data in the form of IP packets, by removing unnecessary ATM and SONET ring resiliency features]. A further cost decline came from the synergies that arose from the interaction between less costly Ethernet transceivers and Optical Fiber, lowering the costs by another order of magnitude. It soon become clear that the Ethernet-LAN could now extend to distances encompassing tens of kilometers, making possible the use cost-effective LAN- equipment to achieve the same goals of more complex and expensive WAN technologies such as ATM/SONET.

6. McAdams -- GEF6 Telcos provision Gig-E networks As demonstrated by SCT BOCES’s “Diffusion Gig-E Network” (see below), –Verizon built, owns, and operates a pure Gig-E network –This network supplies a Gigabit to every school in each of 8 school districts (in upstate NY) as a leased-bandwidth service offering from Verizon. The neighboring Broome-Tioga BOCES provides services through a network which they have built using dark fiber from Time Warner Telecom and the Telco, thereby being able to deploy more-quickly such technologies as WDM. Over 1,000 schools in Quebec have a similar network design

7. McAdams -- GEF7 SCT BOCES

8. McAdams -- GEF8 Problems for Telcos Without the use of ATM, SONET technologies can meet customer expectations in terms of speeds and reliability at lower cost, thereby undermining the need for Telco services It is now possible for small users to satisfy their data networking requirements without using carrier transmission equipment 10GigE is down the line, providing another factor of improvement and challenging the best telco offerings (of OC-192 at $1M per POP) with switches that cost <$100k

9. McAdams -- GEF9 Therefore … TTG5 (distributed to all) presents technical analysis of what GEF involves Gigabit Ethernet is here to stay

10. McAdams -- GEF10 Broadband technologies ADSL Cable Modem Licensed Wireless Unlicensed Wireless Satellite Ethernet over Fiber

11. McAdams -- GEF11 Origins DSL and Cable Modem –Incremental additions to existing, mature-infrastructure technologies Licensed Wireless –Initially costly due to licenses and high frequencies Unlicensed Wireless –Only way for independent ISPs to get in the broadband business given the level of open access provided by incumbent LECs and Cable Operators Satellite –Will eventually happen, but will never match the speed of fiber GEF –Grew from the enterprise environment (see below) –Gained market acceptance, and –Advanced to the point where it is “ready for prime time,” even in residential deployments

12. McAdams -- GEF12 Market Structures: I Telco infrastructure was created under monopoly conditions and explicit government regulation The incentive structures that resulted led to the deployment of costly, though effective, voice- centric solutions The guaranteed returns on the asset base resulted in long-lived debt as the mechanism for funding equipment Cross-subsidization required of the AT&T parent still remains in access fees between long distance and local users

13. McAdams -- GEF13 Market Structures: I Telcos still retain strong market power in the local loop but nonetheless are being subjected to competitive pressures. The structures of technology, equipment, pricing and funding has proven fragile in the presence of even this level of competition. The financial viability of even the strongest of the ILECs is now being questioned by leading financial market analysts.

14. McAdams -- GEF14 Market Structures: II Cable modem providers are also under severe financial pressure as result of … –Highly leveraged debt structure and –Increased pressure on their core video services from direct to home satellite providers The architecture of the cable network was created for one way broadcast and has been retrofitted (HFC Network) to accommodate two way communications Both technologies (cable modem and DSL) are currently offered in the 1 Mbps range, and neither technology is easily capable of improvements greater than a single order of magnitude in the near future.

15. McAdams -- GEF15 Market Structures: III GEF is at an early stage in its technology-life, as noted above It is already deployable at 10 gigabit per second speeds The GiG-E technology had its origins with the military-research- university community –The objectives of these institutions was to achieve exchange of knowledge of information, not to account for bits transferred across the wire GigE best embodied the optical, packet-based, always-on network The network was created, from the ground up, to permit multiple service offerings –It has shown significant resistance to profitable private sector operation (e.g., the “dot-com” experience has shown that it is hard to make money)

16. McAdams -- GEF16 Conclusion Three way competition (ILEC, Cable, Gig-E) continues to erode the financial position of the ILECs and of the firms providing cable modem service Profitable operation of these types of networks requires –Limitation of availability and –Presence of market power Neither of which is easily achieved for GEF Enormous opportunity for not-for-profit players Market is ripe for upset-entrant(s) as leader- catalyst(s) to change the paradigm