Equinix and the Carrier Ethernet Opportunity

Includes: EQIX, IQNT
by: Rich Miller

On Monday Equinix (NASDAQ:EQIX) launched the Equinix Carrier Ethernet Exchange, a service designed to make it easier for global carriers to exchange data traffic. The company, which has established itself as a market leader in colocation and Internet peering, hopes to extend the "network effect" of its data center ecosystems to an important new market.

Carrier Ethernet is a standard created to extend data-centric Ethernet networks to connect with telecom networks initially designed to carry voice traffic. As such, it’s an important enabler of the convergence between global communications networks as the growth data traffic begins to outpace voice traffic. The global market for Ethernet services is expected to exceed $30 billion by 2012, according to Vertical Systems Group.

But connecting carrier networks directly can be time-consuming and involves technical and business challenges. Carrier Ethernet exchanges are seen as an important next phase, making it far easier for networks to connect across geographies.

Equinix has been developing its Carrier Ethernet exchange since last fall, and announced a lineup of 24 major telecom participants Monday as it rolled out its offering in five major markets – Los Angeles, New York, Silicon Valley, Chicago and London. EQIX hopes to add another 14 metro regions in the next year.

Equinix isn't the only player in this emerging market. There's also CENX, a Carrier Ethernet exchange launched last fall by Nat Chen, founder and president of the Metro Ethernet Forum. On Monday CENX announced that it has also launched a European Carrier Ethernet exchange housed at a London data center operated by Interxion, with future expansion plans for Amsterdam and Paris.

A third provider, Neutral Tandem, (NASDAQ:TNDM) also has an exchange in development, which it hopes to deploy in 14 U.S. markets later this year.

Disclosure: No positions