Telegeography put out an interesting item yesterday. Citing data from its IP Transit Forecast service, they projected that IP transit revenues globally will fall at a rate of 6% annually over the next 7 years. That's not pricing, which always goes down, but revenue -- suggesting the overall market will shrink significantly.
IP transit revenues in any particular geography are a balance between everpresent pricing declines and traffic increases. It's perhaps the toughest neighborhood in the infrastructure world, and one that few carriers today see as a growth engine. But the forecasted global decline isn't about that. It's about a general flattening as emerging bandwidth markets mature and become more like the US/Canada and Europe.
The big revenue declines will come in the Middle East, Africa, Latin America, and Asia, while the US/Canada and Europe will see little if any movement. These are places where you still pay a heck of a lot per bit for IP transit by the standards of the US and Europe. Bits tend to travel much further, depending on far away points of interconnection even for local traffic, and not yet enjoying the benefits of real scale.
But the winds of change have been building for a while. In recent years, new submarine cables have started to bring big bandwidth into previously distant markets. We are seeing internet exchanges gain steam in each region, with local peering really starting to take hold. In fact, Telegeography makes clear that much of those revenue declines will probably come simply from a shift in the balance between transit and peering of all types. And while the IP transit market may decline, it seems as if the broader infrastructure markets will be poised to boom as the costs of operation drop and demands of wireless data work their magic in emerging markets that remain infrastructure-poor.
So the moral of the story is: if you want to make money in these regions, you'd better view those attractive IP transit margins as transient and a path toward the development of other products as the real growth opportunities.
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