A C C E S S F O R A C O N V E R G I N G W O R L D
The EFM standard’s provisions for configuration and
management allow well-designed system software to
make turning up carrier-class services on the equipment
very straightforward. Zhone’s EFM Application Guide
takes you from a sealed box of central office gear to
bridged Ethernet service in just four simple steps — the
first of which is “unpack the box and plug it in.” With
the
touchless EFM provisioning
built into Zhone’s single-
line, multi-service (SLMS) access operating system, the
end customer needs to perform only that first step, and
the rest can be completely automated. EFM services can
be installed and brought up in a tiny fraction of the time
it would take to deploy fiber for a business customer or
cell site.
Zhone’s service provider customers have reported that
EFM’s simplicity and ease of use reduce the ongoing staff
costs of network configuration and maintenance per
subscriber by at least 20%, and in some cases as much as
50%. They also report that staff training time is dramati-
cally reduced, as the technology taps directly the base of
experience in Ethernet that is common in today’s network
technicians.
The Business Case
A strong case for launching EFM services can be made for
each alternative carriers, and custom network service
operators. The cases for each differ in their particulars,
but the net result is the same in all segments: deploying
EFM is a very financially attractive concept. We’ll look at
each situation in turn.
Alternative Carrier or CLEC
For the alternative carrier / CLEC segment, EFM is all
about the upside of taking new market share with a
superior price/performance offer. In this case a represen-
tative customer cash-flow payback analysis would look
roughly like this:
Recurring Revenues and Costs,
Offer: 10 Mbps service, requiring 3
Revenue
.......................................
$400
Costs:
Loop lease
.........................................
45
(3 x $15 ea.)
Operation
........................................
100
Total
...............................................
145
Monthly cash flow per customer
.......
$255
1x Costs per Customer, US$
Customer acquisition (marketing)
......
200
Equipment, installation
..................
1,000
Total
...........................................
$1,200
US$ per Month per Customer:
leased dry-copper loops
The high profitability of this customer segment yields
very rapid payback for these alternative models where
service providers are building custom networks for SMOs.
Custom Network Service Provider
The third model is a variation on the alternative carrier
approach, and one pioneered by a Zhone customer in
Europe. In this case the network operator sells the service
concept to individual customers before buying and install-
ing any equipment. The operation’s capacity is extended
only when the customer is signed on, and completely at
the customer’s expense. (The viability of this model in
other geographies is likely to be very dependent on the se-
verity of unmet demand for affordable higher-bandwidth
options in the SMO segment.) The custom network pro-
vider operates a dedicated configuration of equipment for
each customer over leased unbundled local loops, becom-
ing in effect an extension of their IT infrastructure. The
profitability of this customer segment carries through to
the custom network model as well — operating income
for this case is currently running in the mid 40% range.
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