How much should international IP VPN service cost?

8 Jul 2008

IP VPNs and private networks are a lifeline for international businesses, providing secure communications between headquarters and far-flung locations. Telecoms companies around the globe are vying for corporate customers, offering IP VPN, private lines, and dedicated Internet access in cities around the globe.

This market is proving to be a challenge for buyers and sellers, alike. New data from TeleGeography’s Enterprise Networks Research Service reveal that prices for international network service vary dramatically, by service provider, by country, and by class of service. For example, while the median price of a 2Mbps E-1 IP VPN port in London was USD576 per month in Q1 2008, a comparable connection would cost USD1,034 in Hong Kong, USD2,871 in Beijing and USD6,083 in La Paz, Bolivia (see Figure).

The wide range of prices quoted by telecommunications companies for similar services within a given city suggests that telcos, too, are having a difficult time finding appropriate prices for their services. For example, in Beijing, prices for 2Mbps VPN ports varied from just over USD1,300 per month to nearly USD5,000 per month.

The rate of price change also varies widely by market. The median monthly price of a 1.5Mbps T-1 port in Atlanta fell 19%from USD580 to USD470 between Q2 2007 and Q1 2008. In contrast, the median E-1 port price in Dubai, one of the most expensive markets tracked by TeleGeography, fell only 4%, from USD16,538 to USD15,877.

‘VPNs lie at the heart of modern corporate networks,’ said TeleGeography analyst Gregory Bryan. ‘However, the tremendous range and variability of prices reflect that this market is neither transparent, nor commoditised. Both buyers and sellers of wide-area networking services need to keep close track of market prices to ensure that the prices they charge—or pay—are appropriate to the markets in which they operate.’

TeleGeography’s Enterprise Networks Research Service provides comprehensive and timely market data and expert analysis for IP VPN, retail private line services, and Dedicated Internet Access (DIA).

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TeleGeography's Enterprise Networks Research Service