Many products can now carry
such traffic using Pseudowires (PWE3) technology.
The Effect of Worldwide CAPEX Patterns on Ethernet Adoption
Like the airline industry, the telecommunications industry is capital intensive, has low
marginal costs, and is extremely competitive.
Capital intensive means a Service Provider that wants to provide services needs first
to invest in significant assets prior to offering its services; in other words, it requires a
large amount of network assets to finance a certain amount of sales, and automation
leads to less and less labor to operate the networks.
Since the telecom industry is more capital- than labor-intensive, the marginal cost
(the cost of turning on a new service) is low.
The deregulation and liberalization of the late 1990s created fierce competition all
over the world as numerous new Service Providers entered regional, national, and international
telecom markets, resulting in price pressures and consolidation among Service
Providers. Competition also drives the price to the lowest marginal cost of production,
which eliminates Service Providers that do not efficiently use economies of scale (e.
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