Virtual Private Networks Gain Small-Business Momentum

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Maturing technologies are pushing virtual private networks deeper into the small-business market and prompting a renewed interest among VPN providers to privatize connections between a host of users, including key segments such as telecommuters, regional business offices, small businesses and branch offices.

Recent technical upgrades and tweaks designed to give VPNs more security, easier deployment and a confidence boost to privacy-wary users are being counted on to elevate VPNs to "viable business" status and to expand the VPN market to include more cable operators.

As a result, VPN players such as Cisco Systems Inc., Nortel Networks, Redback Networks Inc., 3Com Corp. and others are renewing their commitments to VPNs and to the potentially lucrative worldwide market, which is predicted to reach $18 billion in Internet protocol-based VPN services by 2004 in the United States alone, according to a Frost & Sullivan report.

"The technology is understood and baked. Now it's a deployment issue over HFC [hybrid fiber-coaxial] networks and with service providers. The difficult part is convincing everyone that the security we have is solid," Cisco manager of cable commercial solutions Tarun Loomba said.

With Cisco's recent acquisition of Altiga Networks Inc. and Compatible Systems-two providers of integrated VPN solutions for remote-access applications-as well as the company's new "VPN 3000 Concentrator" series, Cisco's move into the VPN space is being solidified, Loomba said.

Said Loomba: "We're providing MSOs with the means to deploy any VPN model-from the basic pipe, to deploying the VPN technology and having the enterprise manage the VPN, to fully managing the intranet connectivity."

The company's VPN cable strategy, Loomba explained, is based on a migratory approach. "Given [the fact that VPN] is a new segment for most MSOs, we suggest that they start with more basic services, such as small-business Internet access, and build up to the managed services as they move up the experience curve."

Once the experience of deploying and managing a VPN is gained, the larger markets become an appealing revenue stream, Loomba noted, and they will likely generate significantly higher VPN revenues in the next four years.

Telecommuting, for instance, is expected to generate nearly $6 billion in revenues from 30 million telecommuters, according to International Data Corp., a market-research firm.

Yet despite the impressive potential of VPNs, questions remain about the depth of security and privacy they can offer. Data Over Cable Service Interface Specification encryption in cable modems is helping, but most experts agreed that more technology needs to be embedded in VPNs to alleviate any ongoing fears of network break-ins, while even more work needs to be done on the customer-awareness side.

"We're working with modem and headend vendors to deploy the equipment in such a way where subscribers can't snoop on traffic, and DOCSIS encryption helps. But just because you're encrypted doesn't mean you're secure. Net-based security can avoid that, and that's what people are mostly interested in," said Dave Ginsberg, director of product marketing for Nortel IP Services, a business unit of Nortel Networks.

Nortel, Ginsberg noted, is gaining traction with customers that are combining its "Shasta" net-based device, termination box and IP-based PC products, and for cable, the emergence of cable modems is turning into a VPN opportunity.

"Operators can offer a portal through the Shasta box. There are lots of people using cable modems at home and small businesses who might be using them instead of DSL [digital subscriber line] service, which is perceived as the only VPN service for business. But that's changing," he said. And the change is prompting Nortel to expand into the cable space.

Some experts wonder if the VPN learning curve might be too steep, or if true VPNs are even warranted. After all, a VPN is simply a secured connection, Intranet Networking Co. president and CEO Michael Coden said. "VPNs in general are just any number of secured techniques to get people connected by encryption to not get spied on."

All Internet data is packetized, Coden noted, so anyone can see the packets of other people. "The whole idea of a VPN is having equipment set up that's encrypted, with multilinks that are easy and convenient for the parties involved."

For many customers, easy and convenient has meant DSL, Coden said. And unless more cable modems are sold, the cable industry may be missing an opportunity to benefit from the growing interest in VPNs.

The challenge for the cable industry, Coden noted, is to get closer to the data business. "Cable doesn't seem to be looking at data squarely in the eye. If they don't, the telcos will eat their lunch," he added

Just how cable operators approach the VPN space, and whether they can make it a viable business, is an ongoing debate. One thing is certain, however: As 30 million telecommuters and millions of small businesses and branch offices look for secured networks, the technology to keep spies and intruders away is likely to gain interest.

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