They're losing the race. Bandwidth demand doubles or quadruples annually among the largest enterprises. However, the cost falls only about 20 percent per year.
Enter Gigabit Ethernet, a newish turn of an old technology that is rapidly changing the rules of network architecture and could dramatically reduce the cost of bandwidth.
If only companies could get their hands on it.
By most estimates, 80 percent of the large businesses in the US are connected to the Internet with nothing fatter than a T1 (1.5-megabit-per-second) line. That's plenty for email, but too slow for the thoroughly modern business that wants to dazzle with PowerPoint presentations, videoconferences, and up-to-the-minute quotes, charts and billing data.
The fibre-optic pipes running across continents are fat ribbons of glass divided into 160 wavelengths, each carrying traffic at 10 gigabits per second.
Inside the office, the local area network (LAN) Ethernet connections are fast enough for an employee to multicast a report, read the stock tables, take part in a videoconference and play Internet poker simultaneously.
But the last-mile link between the office and the backbone is like a soda straw between two garden hoses.
"Everyone knows there's this serious bottleneck between fast local area networks and terabit fibre crisscrossing the country," says Ron Young, co-founder of Yipes Communications, one of the companies thriving in the optical Ethernet space. "When four out of five businesses have slower than T1 access, no wonder the promise of the Internet isn't being realised."
Lots of promise
Market research firms estimate that interconnecting services in metro areas is currently a US$2 billion opportunity that may reach $10 billion to $16 billion by 2006.
Though the venture capital spigot is turned to low right now, money is still chasing companies that can bypass the bottleneck. Private equity firms showed their faith in March, flooding Sigma Networks' optical Ethernet solution with $435 million and pouring $275 million into Looking Glass Networks, which plans to own optic fibre in the metro area and carry both voice and data. Old hat Telseon raised $175 million earlier this year, and StorageNetworks and GiantLoop Network still show well for venture capitalists.
What the companies have in common is the ability to race traffic in Internet Protocol packets from the LAN to the backbone using Ethernet technology.
