Did IP Transit Pricing Decline Again? Is the Pope Catholic?

November 16th, 2010 by · 1 Comment

According to a release from Telegeography today, IP transit pricing continued its fall but with no real change to current trends.  The median price for a GigE port in New York fell to below $8 per Mbps by the end of the second quarter of 2010, with London following closely. In Hong Kong, pricing for the same port fell to $28, with Tokyo a bit higher now.  That pricing for a GigE port has fallen at a 15% compounded rate over the past five years should surprise no one though.

Actually, it would be a lot higher if one just looked at New York, for whom the number is 22%.  But pricing per bit always, always, always declines, because as technology advances the costs per bit fall and the number of bits transmitted rises.  What really matters is just a matter of how much, and what the balance is between the three.  Traffic growth has been steady but not spectacular, IMHO remaining largely in balance with pricing declines.  However, the rate at which costs decline is much more difficult to measure or even estimate.

I suppose the only way to really do it is to take a look at the wholesale IP transit marketplace, and see how revenues have been balancing costs.  By and large, it’s been pretty flat lately – with some carriers having better luck than others.  But since only Tinet has shown much interest in a pure wholesale model lately and even they seeing their best growth in Ethernet, we can be pretty sure that basic IP transit remains a tough neighborhood for carriers.

But I can’t really figure out those high Tokyo and Hong Kong numbers.  How can you juxtapose such powerful FTTH numbers with IP transit costing $28+ per Mbps?  Seems like the folks operating websites in the region would be a tad worried over their bandwidth bills…

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Categories: Internet Traffic

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  • GigabitG says:

    Good article Rob, it’s good to get some data on IP Transit pricing. As you rightly point out, the decline in pricing is broadly off set by the increases in volume.

    There’s no shortage of supply of IP transit, always giving carriers the incentive to offer ever lower rates for the high volume customers..

    However, it’s not just about pricing, companies like Tinet have been good at marketing the value-add, like having native IPv6 as a way of differentiating themselves in an over-crowded market.

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