Building cost effective lower layer VPNs: The ILEC/CLEC dilemma

Layer 2 and layer 1 Virtual Private Network (VPN) services; ranging from simple leased lines to extending private LANs across public networks, are commonplace today. With the continuously growing economic difficulties, capital meltdown, and telecommunication business turmoil, delivering those VPN services at the lowest cost or with the maximum revenue margin, while committing to Service Level Agreements (SLA), has become essential. We show that whether we tackle the optimal VPN design problem from an Incumbent Local Exchange Carrier (ILEC) standpoint or from a Competitive Local Exchange Carrier (CLEC) standpoint, we obtain contradictory rules. We show that by building Edge Disjoint VPN trees and spreading the traffic all over the network, the ILEC can achieve maximum throughput and enhanced network performance; while by concentrating all the VPN traffic over a single tree, the CLEC can minimize the cost of leased bandwidth. We then propose two simple algorithms that can help carriers and service providers leverage their networks and increase their revenue margins while meeting SLA requirements. Copyright © 2010 John Wiley & Sons, Ltd.