10 Gigabit Ethernet Prices Spiraling Downward

Force10 Networks follows the trend of reducing prices by slashing the cost of its two-port 10 Gigabit Ethernet line cards.

Force10 Networks Inc. next week will give 10 Gigabit-per-second Ethernet a shove down the price curve with a 44 percent reduction in the cost of its line cards.

Prices for the emerging high-speed networking technology, in use today mostly in educational, research and government installations, have begun to inch downward among the primary vendors supplying 10 Gigabit Ethernet interfaces.

Since Extreme Networks Inc. introduced its 10 Gigabit Ethernet offering eight months ago, it has discounted its list price twice, according to John Erlandson, director of product management at the Santa Clara, Calif., company.

"We originally introduced our 10 Gigabit Ethernet at $59,995 [per port], then dropped it to $49,995, and today we have a special promotion for $25,000 per port," he said.

Force10 Networks price reduction brings the list price of its two-port 10 Gigabit Ethernet line cards from $110,000 to $62,000, or $31,000 per port. "Customers in volume will be able to get it in the $17,000[-per-port] range. The street price before the change was about $35,000 per port," said Steve Mullaney, marketing vice president at the Milpitas, Calif., company.

Meanwhile, Foundry Networks Inc. next week will introduce a second-generation 10 Gigabit Ethernet module for its switch/router line that will have between 10 percent to 15 percent lower pricing per port than the existing module, according to Foundry officials.

"We think itll come down to $5,000 or $6,000 per port by 2006," said Chandra Kopparapu, director of product marketing at Foundry, in Sunnyvale, Calif.

That is the kind of pricing that is necessary for the technology to become mainstream, believes Frank Dzubeck, president of Communication Network Architects Inc., a Washington-based consulting firm.

"It will have to be below $10,000 [per port] to accelerate the marketplace," he said. Force10s move, if it succeeds in pressuring competitors to further reduce their prices, is "the first evolutionary price drop that will go from the 5 percent early adopters to the 20 percent of the people who can afford to do it," Dzubeck said.

Force10s decision to discount follows a "lackluster" 2002 for the 10 Gigabit Ethernet market, according to Chris Kozup, senior research analyst at Meta Group Inc., in Burlingame, Calif. "The majority of enterprises outside those that are very processor-intensive dont have a requirement for 10 Gigabit Ethernet. Between a lack of recognition in the market and lack of need combined, it isnt surprising to see this price adjustment," he said.

But "processor-intensive" installations are growing as a result of the move toward grid computing and the consolidation of data centers, where users are clustering Linux blade servers, according to Force10s Mullaney.

"All those blade servers come with one or two ports of Gigabit Ethernet for free," he said. "You need a way to aggregate thousands of Gigabit Ethernet-attached servers, so you have to interconnect switch/routers with a higher-speed trunk. Gigabit Ethernet to the server is driving 10 Gigabit Ethernet trunks."

And grid computing is catching on faster than most in the industry realize, said Dzubeck. "There are over 100 [grids] being built in California now—more than we thought existed in the whole country. Theyre happening in corporations for all sorts of diverse applications. Theres really, really good momentum in this area," he said.

Still, 10 Gigabit Ethernet today is "a bit ahead of its time," Kozup said. And with no word from networking behemoths Cisco Systems Inc. and Nortel Networks Ltd. on their pricing plans, its impossible to tell how quickly demand will ramp up. Both vendors declined to comment.

But the promise is there long term. "It allows you to scale the Ethernet technology without costly protocol changes and the management challenges those bring," Kozup said.