New data from TeleGeography’s Global Bandwidth Research Service reveals that the average price of wholesale circuits in most major markets dipped by 10-20% in 2007 (example shown in figure: Miami-New York, 2005-2007). This decrease would represent a steep decline in most industries, but it’s a far cry from the price collapse carriers experienced in the early 2000s.
As price declines have moderated, international bandwidth demand has remained strong, growing at a compounded annual rate of 52% over the past five years.
Still, revenue growth remains elusive for many wholesale network operators. A key reason lies in bandwidth buyers’ changing purchase patterns. Instead of simply buying more circuits to handle their growing traffic volumes, wholesale buyers are purchasing larger, higher-capacity circuits. Companies that may have purchased a few 155Mbps STM-1/OC-3 circuits five years ago are now opting for 2.5Gbps or 10Gbps wavelengths. These large circuits are far cheaper in terms of the price per Mbps of capacity than the smaller circuits.
“The effective price per Mbps of capacity sold is falling a lot faster than nominal circuit prices, themselves,” observed TeleGeography Research Director Robert Schult. “Carriers need to sell ever larger volumes just to maintain stable revenues.”
TeleGeography’s Global Bandwidth Research Service provides the most detailed analysis of the long-haul network and submarine cable industry available — including supply, demand, costs and pricing analysis as well as profiles of 119 submarine cables and 176 network operators.
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