Over the weekend, Renesys posted one of its infrequent but highly insightful updates on the IP transit market, I recommend a read. On the menu besides the usual pricing pressure spearheaded by (but not limited to) Cogent Communications (NASDAQ:CCOI, news, filings) was the quickly shifting market in eastern Europe, the rising tide of paid peering between eyeball networks and content providers, strength in Asia, and of course Google.
In eastern Europe, prices have apparently fallen nearly to those in the west. Of course, this had to happen sooner or later. Pretty much every carrier saw those high margin sales just a few hundred miles away and has been building their way eastward in one form or another for a couple years now. Level 3 is in Budapest and Sofia, Cogent is now all the way into the Ukraine, and Interoute is in Russia. Telia, glbc, and Tinet have been quite active as well. And what happens when you get half a dozen or more wholesale IP transit providers in every hub? Yep, no more high margins.
A bit further under the radar though has been the trend toward private peering between eyeball networks and CDNs. The threat here is definitely to the pure wholesale networks, i.e. the middleman in this case, and the danger is that all that coming video traffic will bypass them. Of course, it isn't as if there is no price for this private peering. The eyeball networks, now with network neutrality hampering their efforts, aren't likely to give that access away for a song.
And on Google's bandwidth sales over the Unity cable, there really is no danger of Google trying to become a telecom. What Google is doing is what Google always does when outside its own backyard - it is trying to effect a change in the market. Google wants better, faster, cheaper transpacific assets because it benefits the rest of their business long term. With this quiet threat of competing on transpacific bandwidth, Google is simply saying to network providers that prices in, to, and from Asia are going to come down one way or another, because that's why Google helped build the damn cable in the first place. When prices come down, they will magically vanish.
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