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-bases company was in 1,000 square feet above a pizzq parlor in Palo Alto with just eightf employees. Now, after raising $97 millioh in two rounds of venture funding and soon to complete a thirrd round in excess of anadditional $100 Yipes has just moved into new headquarterz with 50,000 square feet of space on five floors in downtowbn San Francisco. It has close to 300 employeesz and has its network up and runninfg in 15 majormetropolitan markets. That is expecter to increase to 20 by year end and 60 by the endof 2001.
"Itf you are in a fast-evolvinfg industry, slowing down enables competitors to see what you are Going slow allows otherz to catch upto us," said Ron Young, one of six founders and chief marketingb officer. "Look at DSL. Thered are lots of DSL providers. The first one out thers -- Covad -- is the one with the big markef cap. That's what we What Yipes believes gives it a compelling competitivd advantage over traditional telecommunication s providers is that its networko has eliminated the need for expensive switching equipmenty byusing Ethernet. Etherne is a protocol already widely used in officee environments tonetwork computers. "Ethernet is alreadyu ubiquitous.
It's already in every office in the As Ethernet was increasing its speed togigabit speed, it became obviousw -- oh, my God -- this was the next architecture," said Franko Robles, Yipes co-founder and vice president of corporate "Marvel of marvels, you don't have to use the phon company for this stuff. In fact, you don't have to use the phonew company for any partof it. In fact, they can'g even do it themselves withoutf cannibalizing a trillion dollars ofembedded infrastructure.
" Though Ethernef was originally designed to work in loca l area networks over copper wire to connect computers at a closs distance, new fiber Ethernet has eliminated space restriction and is offerinf speeds of as much as a gigabyte per second. That'x created new uses for the technology. "The best way to look at this is they have takebvery standard, off-the-shelf technologg that's well understood -- Ethernet LANs -- and figured out how to appl it to metropolitan and wide-area communications," said Dave research director for The Burton a network and telecom research and consultin firm.
"Instead of using traditional telco they have chosen to take advantage of much simplerf enterprise or internal corporate networkingg and build a carrier network outof it. It's pretty simple and proven." But usingb simple and proven technology while delivering impressived benefits to customers is precisely why Yipes feels an urgency to establish as big a footprint as quicklhas possible. Though it is consideref to have established an early lead among other telecommunicationz companiesusing Ethernet, abouy a dozen others, such as Englewood, Colo.-based Telseon Inc. and Texas-based airBand Communications, are on its heels, also racin to stake their own claims.
"The barriers to entryt are very low. It's a land grab right now. Whoeve r can build the fastest and sign up as many customerds and sign as many agreements with data centerws as fast as possible is goin toultimately win," said Andresw Cray, senior analyst with the Boston-basedx market research and consulting firm The Aberdee Group. "Yipes, Telseon, any of these companie will not have sustainable advantagefor long. They'vd got to make the most of Yipes usesa high-speefd fiber optic network.
The "IP" in "Yipes" is a referencwe to Internet Protocol, the transmission of data in packets, as opposexd to the circuit-switched networks used in traditional telecommunicationse that require companies to invest in expensive routerx andswitching equipment. By purchasing "dark -- unused capacity laid in the ground bytelecommunication utilities, cities and others -- Yipes has been able to rapidlyg establish a large footprint without the delaye and expense associated with digging trenches and buryinvg glass in the ground. "Wse can't imagine why somebody would want to be burying fiberright now," said Robles.
"This would be like someoner deciding they would want to make vacuum tubes in 1979 as the transistor is beginnintg to getbroad distribution. We want to get fast speed to market." Using Ethernet delivera substantial benefits to It offers greater speed and flexibilith while slashing the cost of Analysts said Yipes can deliver savings of between 30 percent and 90 percent overincumbent Today, when business users buy bandwidth from a traditional they have rather limited choicee because of the increments of the equipmeny involved. A T-1 line transmits data at a rateof 1.
5 Though several T-1 lines can be bundledd together, the next step up is a DS3 line at 45 megabitsz per second and then an OC3 at 155 megabit s per second. Yipes allows customers to buy bandwidtb in increments of one megabit and can increase or decreasd their bandwidth in a matter of hourwson request. For example, a web site can increase its bandwidtuh for a special event or a universitty can decrease its use during the summer and raisse it again when classes are infull session. It'e not just web-based businesses that find all ofthis valuable.
Consider the Palo Alto office of the law firmFenwicj & West, which about two yearss ago saw email emerging as the primary form of communicationj used by its attorneys. The firm also oftem needed to download entire web sitesd and be able to receive large files becausde its client base includes manysoftwares companies. Matt Kesner, chief information officer forthe firm, said the compan y had been running 600 users on a singlee T-1 line and needed a wider pipe.
Thougyh one alternative was to tieseveral T-1 linea together in a process called "bonding," he said therer would be 30- to 60-day waits whenever the compangy needed to increase the bandwidth and it woulf require an additional investment in routers for the "Bonding requires special routers and isn't very flexible," he "Once you get up above six or seven lines, it is no longer cost-effective and you have to move to fibe r and you lose all of your investment in the Kesner didn't like the idea of ordering an OC3 At 45 megabits per second, it mean paying for a lot of bandwidth the firm didn't The quotes he got for the line range d between $18,000 and $35,009 per month.
Then Yipes came in and withinb 10 days hada 10-megabit connectiobn installed for less than $6,000.