Tinet (news) [a subsidiary of Inteliquent (NASDAQ:IQNT, news, filings)] today launched EtherCloud, a new Layer 2 service that builds on the integration of its existing wholesale Ethernet business and the Ethernet Exchange launched by Neutral Tandem last year. Those who connect to it gain both the ability to buy Ethernet and VPLS connectivity to endpoints offered by other participants, and to sell connectivity to their own endpoints in return. Tinet's approach seems to be to simplify the relationships potential customers must develop to gain the connectivity they need, as opposed to simply maximizing the extent of that potential connectivity.
It is the physical manifestation of what Neutral Tandem's COO Surrendra Saboo described as a network exchange in an interview here in October soon after the acquisition of Tinet. The vision is of an exchange that is not geographically limited to one location, i.e. if you connect in Chicago you can reach any other endpoint that is connected via any other location that is part of the EtherCloud, whether that is in Chicago or through an NNI to some incumbent on the other side of the planet, all the way down to the tail circuit where needed. Along with it comes an intuitive and feature-rich customer portal, something that is critical to any such offering.
Following last year's land grab, one of the key pieces to the Ethernet Exchange puzzle in 2011 is the coalescence of the actual business models. What is the actual revenue opportunity? What will the economics look like? Each of the main providers has a different take on it. The plans of of Tinet and Neutral Tandem seem to be aimed squarely at a larger share of the entire Ethernet pie. With EtherCloud they are looking to leverage both exchanges and direct NNIs as a way to maximize their entire Ethernet revenue potential.
By contrast, Equinix's plan seems to be to use exchanges to enhance the revenue opportunity from its core colocation business, whereas CENX and Telx have more of a pure approach targeting just the interconnection opportunity. Which is correct? Maybe they all are, in their own way - it's not necessarily a zero sum game. In the case of Neutral Tandem and Tinet, we can just keep an eye on their Ethernet revenues to find out.