Global Network Tracker Update: Growing Ethernet Footprints, and MPLS Underpinning Cloud and SDN/NFV Stradling, Joel & Whelan, Cindy May 15, 2015

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1 Global Network Tracker Update: Growing Ethernet Footprints, and MPLS Underpinning Cloud and SDN/NFV Stradling, Joel & Whelan, Cindy May 15, 2015 Advisory Report Summary Issue Current Analysis has updated the Global Network Tracker, an interactive market insight tool that features network information from 20 carriers. The service providers covered are AT&T, BT Global Services, CenturyLink, Colt, Deutsche Telekom/T-Systems, Interoute, KPN, Level 3, NTT Communications, Orange Business Services, PCCW, Reliance Globalcom, SingTel, Sprint, Tata Communications, Telefónica, Telstra, TI Sparkle, Verizon and Vodafone Global Enterprise. This report explores trends in the global connectivity services market and identifies regional leaders. The GNT service includes six competitiveness tables showing the competitive standings of the carriers covered for MPLS, E- LAN/Virtual Private LAN Service (VPLS), Ethernet Private Line (EPL), Ethernet Virtual Private Line (EVPL), Ethernet access and DSL access. The most recent tables for MPLS and E-LAN/VPLS are included in this report; the other tables are available to subscribers of the Global Network Tracker service under the Service Competitiveness tab. Key Takeaways Service providers are increasingly looking to partnerships to expand reach, particularly in markets such as China, the Middle East/Africa and Latin America. Carriers continued to expand Ethernet reach and speeds, with considerable attention on offering 100G, and make considerable efforts to deliver consistent Ethernet through third parties. Owning and operating a local cloud-enabled data center presence for supporting cloud computing has advantages but is not essential. As regulatory environments continue to evolve, carriers are able to extend global support for SIP trunking offers that include local as well as long distance services. Perspective Current Perspective Ongoing Efforts to Expand Reach and Connectivity Options in Emerging Markets Market activity has seen more use of partnerships and interconnections to give greater global reach options. Many operators have co-deployed POP assets within partner data centers, placing MPLS infrastructure strategically on or close to servers that support cloud computing resources. Ethernet and DSL access continued to expand, with for example Level 3 significantly increasing its coverage in the Middle East/Africa region, it now offers Ethernet access in 57 countries in this region and DSL in 37 countries. Along with partnerships there have been examples of aggressive acquisitions to expand reach, including Telstra, which has acquired Pacnet and in doing so roughly doubled its APAC MPLS footprint and grown its number of APAC Ethernet nodes from 38 to 108. Meanwhile Colt, for example, has expanded its MPLS PoPs in MEA to 43 from a previous count of nine, but these are not wholly-owned PoPs, the carrier can offer better MPLS connectivity into the region by leveraging PoPs owned by its partners. The following tables show prominent service provider momentum in MPLS POP coverage as a result of organic expansion and partnerships (Eastern Europe is excluded as there was no noticeable trend): MPLS Rating Changes - APAC SingTel Positive From Competitive to Strong SingTel has tripled its POP count as a result of its extensive partnerships across the region. Vodafone Negative From Strong to Competitive Vodafone s APAC reach spans 14 countries via more than 50 PoPs, but competitors now claim reach that is both broader and deeper through owned PoPs and partnerships.

2 PCCW Global Positive From Competitive to Strong Like SingTel, PCCW has a broad pan-asia reach primarily achieved via partnerships with regional providers. MPLS Rating Changes Western Europe Interoute Positive From Concerns to Strong Increased POP and number of countries covered, adding reach into Finland and Norway and expanding reach into France, Germany, Italy, Netherlands, Spain, Switzerland and the UK via a combination of owned assets and partnerships. SingTel Positive From Concerns to Competitive Added reach into Austria, Belgium, Denmark, Finland, Norway, and Portugal via partnerships, and expanded reach in existing countries via a mix of new PoPs and partnerships. Level 3 Positive From Competitive to Strong Expanded direct reach in France, Germany, Spain and the U.K. MPLS Rating Changes Eastern Europe AT&T Positive From Competitive to Strong AT&T noted an increased number of PoPs deployed in the region, along with new reach into several countries. NTT Com Positive From Concerns to Competitive NTT Com deepened its reach in the region through the deployment of new PoPs deployed in the region, although the number of countries reached by NTT Com has not changed from MPLS Rating Changes MEA PCCW Positive From Concerns to Competitive PCCW significantly increased its reach into MEA via partnerships, noting an increased presence from 22 to 45 countries. Telstra Positive From Concerns to Competitive Telstra also significantly increased its reach into MEA via partnerships, expanding its reach from 14 to 48 countries. MPLS Rating Changes Latin America CenturyLink Negative From Competitive to Concerns No change in POP count but CenturyLink has a low PoP density in the region relative to competitors. Global Cloud exchange Negative From Concerns to Uncompetitive Global Cloud exchange has just two PoPs in two countries, much lower reach relative to competitors. SingTel Positive From Uncompetitive to Concerns SingTel has boosted its reach into Latin America, and now claims service to 11 countries, although the provider relies on partnerships, with no owned assets in the region. MPLS Rating Changes North America Vodafone Negative From Competitive to Concerns No change in POP count but has a low PoP density relative to competitors. SingTel Positive From Concerns to Competitive SingTel notes a deep U.S. presence via its partnership with Level 3. MPLS Underpins Cloud and SDN/NFV Strategies IP/MPLS VPN continues to be the foundation for private networks and for supporting SDN WAN initiatives that are in the early stages. SDN WANs have begun to become more widely available with offers available from NTT Com, Telstra, and KVH. Current offers focus on cloud service migration orchestration and automation, with Network-as-a-Service (NaaS) gradually becoming more widely available in the true sense of SDN-enabled service and bandwidth and connectivity provisioning and sizing/re-sizing on the

3 fly. The ability to provide enterprises with access to cloud-based services and applications is strategic for providers. Carriers are expanding support for cloud-enabled data centers, along with private WAN cloud connectivity options such as AT&T NetBond, Level 3 Cloud Connect, Verizon Secure Cloud Interconnect, Colt, Interoute, and NTT Com Enterprise Cloud. In 2014, Current Analysis added a category for Cloud-enabled Data Centers to the Global Network Tracker, noting where providers had deployed resources for the delivery of on-demand compute and storage services, database services, and application and content delivery services. A key element of the cloud is the ability to deliver services virtually anywhere. However, while a provider doesn t have to have a cloud facility in a particular country to deliver services to clients in that locale, a local presence can provide some benefit from a performance perspective. In addition, many countries have strict rules around data privacy, making the location of a data center critical. Sales focus and presence was also taken in to consideration in evaluating a provider s capabilities. For example, a U.S.-based provider may serve customers in the Middle East, but its customer base might be almost exclusively U.S.-based companies with operations in the Middle East. The provider serves those customers, but is likely not aggressively pursuing customers based in that region. That provider would be ranked lower relative to one that is actively selling services in the region. Ethernet Matures Ethernet service expansion continues to proceed, with the technology entering a mature stage of its technical lifecycle. All global providers are active in growing local access partner options, with Ethernet as the preferred access type for supporting high-speed multi-service access over fiber. Service availability has expanded across all regions, with several providers noting strong growth. Notable shifts include Level 3 s expanded support for Ethernet access globally, with additional reach in Asia, Europe, Latin America and Middle East/Africa. Orange Business Services and AT&T have also added Ethernet access reach through increased reach in Latin America and Middle East/Africa. SIP Trunking Expansion In 2014, Current Analysis added SIP trunking to the Global Network Tracker, reflecting growth of IP-based telephony services as well as unified communications applications that can be enabled via SIP services. Major providers have offered SIP trunking outside of their home countries for a number of years, although regulatory environments have meant that often these services can only be used for outbound long distance services, with the incumbent in each country providing local services including local calling, emergency response calls, and directory services. In recent years, the regulatory environment has changed in some countries

4 allowing a SIP trunking provider to deliver full two-way services, including local calling. The Global Network Tracker identifies countries where a provider can offer SIP trunking as an outbound only service, as well as countries where that provider is allowed to deliver a full two-way PSTN replacement solution. OBS has been a leader in terms of the number of countries reached and locations where it can deliver PSTN replacement services, with BT, Interoute and Telefonica also posting very strong coverage. The table below represents provider capabilities across each region, comparing support for SIP trunking as an outbound long distance solution. While regulatory environments in the U.S., and countries in Asia and Western Europe have opened sufficiently to allow PSTN replacement services, regulators in Latin America and the Middle East/Africa continue to restrict these capabilities. Recommended Actions Vendor Actions Carriers can continue to highlight network expansion and upgrades, as establishing positive marketing messages around extended reach and better performance (e.g., 100G speeds) appeals to MNC customers. As with previous reports, expanding reach does not necessarily have to demand costly builds, as many carriers are putting in place robust partners in emerging markets to gain access to new target markets. The emphasis on wholly-owned MPLS networks is reduced, driven by hybrid VPN demand and SDN/NFV WAN. Thus the MPLS network is more about enabling cloud and virtualized IT, and offering Internet gateways or a large IP backbone with multiple Internet peers is attractive for a lower cost base and for supporting apps running across public/private/hybrid clouds. Providers that offer cloud computing and own in-country cloud-enabled data centers can highlight the strengths and advantages of that their local facilities give, namely performance and control. However at the same time it is sound strategy to interconnect with carrier-neutral cloud providers such as Equinix in order to have access to expanded markets. SIP trunk coverage is important for bolstering any UC strategy, and similarly local licenses in emerging markets can give benefits and a means to open up opportunities in emerging markets. However there are many wholesale communications providers that can deliver white label solutions, and thus acquiring licenses and deploying infrastructure should be customer-driven with a healthy revenue pipeline to justify the costs, in other words you go where your enterprise client needs you to go. User Actions Enterprise customers should continue to ask their operators which fixed infrastructure and access options they can offer in any given country when looking at global WAN service providers, as in-country assets will give lower costs and more control over

5 performance. Each customer should look to match up site distribution with where the operator has both its own MPLS POPs and can offer service via NNIs with its partners. Private IP/MPLS VPNs are now recognized as a more costly network solution, and therefore customers should be asking their WAN supplier about the available options for a hybrid VPN service that offers an Internet break-out for non-critical traffic. Savings can be achieved by implementing this approach, and customers should ask network providers where they have Internet gateways to make sure no unnecessarily long hops are being used thereby introducing unwanted latency. This report is tagged to the following vendor(s): BT, COLT, Interoute, NTT Communications, Orange Business Services, Telstra, TI Sparkle, Verizon This report is tagged to the following content areas: Service: Business Network and IT Services Market: Global Network Tracker, Wholesale All materials Copyright Current Analysis, Inc. Reproduction prohibited without express written consent. Current Analysis logos are trademarks of Current Analysis, Inc. The information and opinions contained herein have been based on information obtained from sources believed to be reliable, but such accuracy cannot be guaranteed. All views and analysis expressed are the opinions of Current Analysis and all opinions expressed are subject to change without notice. Current Analysis does not make any financial or legal recommendations associated with any of its services, information, or analysis and reserves the right to change its opinions, analysis, and recommendations at any time based on new information or revised analysis. Current Analysis, Inc Signal Hill Plaza, Second Floor, Sterling, VA Tel: Fax: +1 (703) Current Analysis, Inc. 2 rue Troyon, Sevres Cedex, Paris, France Tel: +33 (1)