Bandwidth Prices Sinking, Says Report

TeleGeography Inc. says carrier pricing of IP bandwidth is still dropping in Western Europe and North America. But contrary to some industry opinion, reductions aren't peggable to carriers returning from bankruptcy.

Instead, price erosion is starting with carriers that are new to the IP market and are eager to get customers -- any customers -- to help build volume.

"The cheapest rates tend to originate from suppliers with low network utilization," says Rob Schult, senior research analyst at TeleGeography, in a prepared statement. "Their attempts to gain market share and to get customer traffic onto the network frequently result in prices that are at or below marginal cost."

Schult's not saying that carriers returning from bankruptcy with fresh balance sheets and reduced debt are innocent of price cutting. These carriers are reducing IP transit prices, too, he notes. But they're not the ones with the most drastic cuts. Those are coming from the young and the desperate.

The report by TeleGeography, which is a research division of PriMetrica Inc., indicates that costs of IP transit connections in Europe and the U.S. have fallen continually over the past three years.

For instance, the firm's research on prices of STM-1 (155 Mbit/s) links in London, based on input from Band-X Ltd., a bandwidth exchange, shows prices getting as low as $50 per Mbit/s, for bandwidth sold in 100-Mbit/s increments.

Prices in the U.S. are comparable, Schult says. In Asia, rates are higher, about $130 per Mbit/s, but that's significantly lower than those prices have been, he notes.

Reductions in the price of bandwidth haven't boosted demand. In fact, TeleGeography says, worldwide bandwidth demand is now growing at a mere 74 percent a year, on average. This compares with triple-digit growth rates in the boom years, Schult says.

"At some point the carriers are not recovering their investment," Schult adds, "and that takes away their ability to invest in the future."

— Mary Jander, Senior Editor, Light Reading

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rjmcmahon 12/4/2012 | 11:21:32 PM
re: Bandwidth Prices Sinking, Says Report Will the RBOCs ever achieve selling something at marginal cost? And what does that have to do with the definition of a natural monopoly vs. competition? And exactly what determines the marginal cost of transporting a bit, i.e. how much goes to the regulator, the bureaucrat, the politician, the lobbyist, the lawyer?

"Their attempts to gain market share and to get customer traffic onto the network frequently result in prices that are at or below marginal cost."

The above seems like capitalism at work. Sadly, work seems to be a missing ethic within the last mile gatekeepers.

Lay the fiber please.
Flower 12/4/2012 | 11:21:32 PM
re: Bandwidth Prices Sinking, Says Report I assume these prices are per month ?

There is no mentioning about distance. Are those prices not related to distance ? Like distance between the ISPs backbone and your location ? Or are these prices just for transit rights, and you still have to pay another telco for a leased line ? In that case, I rather buy 100 ADSL connections at 1 Mbps each, that's cheaper than $50 per month per Mbps .....

mordecai 12/4/2012 | 11:21:31 PM
re: Bandwidth Prices Sinking, Says Report What is


is it
- Access based on STM-1 private line, ethernet pt-pt?
- access based on STM-1, for POS connection to core router, shared service?
- something else?

techathiest 12/4/2012 | 11:21:30 PM
re: Bandwidth Prices Sinking, Says Report The article mentions numbers of $50/Mb for 100Mb service or its increments. And $130/Mb in Asia. How many Mb of bandwidth do these young carriers need to sell to have a sustainable business ? Is there any information on how much dollars per Mb of bandwidth sold, do the carriers (incumbents and younger greenfields) in different regions need to make to have profitable IP or Ethernet bandwidth ?
fiber_r_us 12/4/2012 | 11:21:29 PM
re: Bandwidth Prices Sinking, Says Report As written, the numbers in the article are meaningless. To talk about "bandwidth" as if it was a service does not tell you anything. Are the quoted prices for a Private Line (doubt it)? Frame Relay? ATM? Ethernet? To the local Internet POP?

Any pricing survey must at least include:

1) What service is being offered (Private Line, FR, ATM, Ethernet, Internet Access, etc)

2) Length of contract required to get any "special" pricing

3) Setup fees

4) What are the characteristics of that service. For example:

- An OC-48 Private Line, protected, 3000km, between Dallas & Chicago.

- An OC-48 Dedicated Internet Access, local loop to local POP included, and whatever SLA is spec'd

- An OC-48 ATM/FR access port, number of PVCs, CIR/burst on each PVC, SLAs, etc

All of the above are "OC-48s" at ~2.488Gb/sec; but each is a completely different *service* and each is priced significantly differently.

techathiest 12/4/2012 | 11:21:27 PM
re: Bandwidth Prices Sinking, Says Report I agree with Fiber_r_us.

My point though was if the "young" carriers who are selling bandwidth of cheap are able to do it as a sustainable business. Remember during the height of bubble, there was a carrier selling 100Mb Ethernet port for DIA at $1000/month. I sat through a presentation by one of the carrier's executive. They were using a 15454 OC48 rings with catalyst switches. I never understood how that would be profitable and the executive couldn't convince me they were.
whyiswhy 12/4/2012 | 11:21:26 PM
re: Bandwidth Prices Sinking, Says Report From my perspective, having to arrange Ponit-to-Point comm services once in awhile, it is whatever you want, for whatver you are willing to pay. Long as the check don't bounce. Pretty much.

Think about it: buyers market.
Petabit 12/4/2012 | 11:21:23 PM
re: Bandwidth Prices Sinking, Says Report What you are looking at is a small snapshot of the range of price monitoring data that TeleGeography offers. If you want the complete answer then you'll have to pay them.

The example used in the article is an STM-1 (155 Mbit/s) of IP transit in London. The price is monthly (if you read the graph). You would need to buy a separate access line to get from your site to the central office, and the connection is an STM-1 port on a router that is peered with other major routers.

It does help if you actually read the article before posting questions.

jepovic 12/4/2012 | 11:21:22 PM
re: Bandwidth Prices Sinking, Says Report Fiber_r_us, you disappoint me.

No, the price number that is mentioned, USD/ Mb /month, is a standard price model for the carrier industry. That's the key figure that everyone talks about regarding IP Transit (not for private line, though, that's a whole different thing). So the figures are relevant (and accurate by the way).

IP Transit is always Internet connectivity, not point to point.
jepovic 12/4/2012 | 11:21:22 PM
re: Bandwidth Prices Sinking, Says Report IP Transit is simply Internet connectivity for operators, not a point to point link. "IP Transit" is just a traditional, and now confusing, name.
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