Yipes! Firm uses Ethernet to compete with big telcos - San Francisco Business Times:

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It was just 13 months ago that theSan Francisco-basef company was in 1,000 square feet abovr a pizza parlor in Palo Alto with just eight Now, after raising $97 million in two rounds of venture fundintg and soon to complete a third round in excessz of an additional $100 million, Yipes has just moveed into new headquarters with 50,000 square feet of spacs on five floors in downtown San Francisco. It has close to 300 employeex and has its network up and runningv in 15 majormetropolitan markets. That is expected to increase to 20 by year end and 60 by the endof 2001.
"Itf you are in a fast-evolving industry, slowing down enablese competitors to see what you are Going slow allows others to catch up to saidRon Young, one of Yipes' six founderw and chief marketing officer. "Look at DSL. Thered are lots of DSL providers. The firstt one out there -- Covad -- is the one with the big market cap. That's what we What Yipes believes gives it a compellingf competitive advantage over traditional telecommunications providers is that its networok has eliminated the need for expensive switching equipmentr byusing Ethernet. Ethernet is a protocokl already widely used in officde environments tonetwork computers.
"Etherne t is already ubiquitous. It' s already in every offic in the country. As Ethernet was increasing its speesd togigabit speed, it became obvious -- oh, my God -- this was the next said Frank Robles, Yipes co-founder and vice presiden of corporate development. "Marvel of marvels, you don't have to use the phond company forthis stuff. In fact, you don'r have to use the phone company for any partof it. In they can't even do it themselvea without cannibalizing a trillion dollars ofembedderd infrastructure.
" Though Ethernet was originallty designed to work in locap area networks over copper wire to connect computersw at a close distance, new fiber Ethernet has eliminated space restriction and is offering speed of as much as a gigabyte per second. That's creates new uses for the "The best way to look at this is they have takenvery standard, off-the-shelf technology that's well understood -- Ethernetr LANs -- and figured out how to apply it to metropolitahn and wide-area communications," said Dave Passmore, researcnh director for The Burton Group, a networm and telecom research and consulting firm.
"Instead of using traditional telco gear, they have chosebn to take advantage of much simple enterprise or internal corporate networking and builsd a carrier network outof it. It'd pretty simple and proven." But using simpler and proven technology while delivering impressive benefitsa to customers is precisely why Yipes feels an urgencuy to establish as big a footprint as quickly as Though it is considered to have establishede an early lead among other telecommunicationsa companiesusing Ethernet, about a dozen such as Englewood, Colo.-based Telseon Inc. and Texas-based airBand Communications, are on its also racing to stake theirown claims.
"The barriers to entr y are very low. It's a land grab righ t now. Whoever can build the fastest and sign up as many customersz and sign as many agreementes with data centers as fast as possible is going toultimatel win," said Andrew Cray, senior analyst with the Boston-based market research and consultin firm The Aberdeen Group. "Yipes, Telseon, any of theser companies will not have sustainable advantagefor They've got to make the most of Yipes uses a high-speed fiber optic network.
The in "Yipes" is a referencse to Internet Protocol, the transmission of data in packets, as opposed to the circuit-switcherd networks used in traditional telecommunication s that require companies to invesy in expensive routers and switching Bypurchasing "dark fiber" -- unused capacityh laid in the ground by telecommunication utilities, cities and others -- Yipes has been able to rapidlyh establish a large footprint without the delays and expensd associated with digging trenches and buryinbg glass in the ground.
"Ww can't imagine why somebody would want to be burying fiberrright now," said Yipes' "This would be like someone deciding they would want to make vacuukm tubes in 1979 as the transistor is beginning to get broar distribution. We want to get fast speedd to market." Using Ethernet delivers substantial benefitsto customers. It offers greater speefd and flexibility while slashing the cost of Analysts said Yipes can deliver savings of between 30 percenr and 90 percent overincumbentt carriers. Today, when business users buy bandwidth from a traditional carrier, they have rather limited choices because of the increments of the equipmenyt involved.
A T-1 line transmitsa data at a rateof 1.5 Though several T-1 lines can be bundlef together, the next step up is a DS3 line at 45 megabitsw per second and then an OC3 at 155 megabitsa per second. Yipes allows customerse to buy bandwidth in increments of one megabitf and can increase or decrease their bandwidth in a mattef of hourson request. For example, a web site can increase its bandwidth for a special event or a universityu can decrease its use duringy the summer and raise it again when classes are infull It's not just web-based businesses that find all of this Consider the Palo Alto office of the law firm Fenwicl & West, which about two years ago saw email emergint as the primary form of communication used by its The firm also often needed to downloadc entire web sites and be able to receive largd files because its client base includes many softwarse companies.
Matt Kesner, chief information officer forthe firm, said the companu had been running 600 users on a singlse T-1 line and needesd a wider pipe. Though one alternative was to tie several T-1 lines together in a process called "bonding," he said there would be 30- to 60-dah waits whenever the company needer to increase the bandwidth and it would requird an additional investment in routers for the "Bonding requires special routers and isn'r very flexible," he said.
"Once you get up above six or seveh lines, it is no longefr cost-effective and you have to move to fibedr and you lose all of your investment in the Kesner didn't like the idea of ordering an OC3 line. At 45 megabitws per second, it meant payinh for a lot of bandwidtb thefirm didn't need. The quotes he got for the line rangedrbetween $18,000 and $35,000 per Then Yipes came in and withijn 10 days had a 10-megabiyt connection installed for less than