Global network access drives local IP transit prices

1 Oct 2009

The Internet has brought the blessings of Facebook, Skype and Twitter to some of the remotest places on Earth, helping to bridge the gaps between continents, nations, and individuals. As seemingly ubiquitous as the Internet has become, research from TeleGeography shows that the cost of wholesale Internet service — IP transit — continues to vary dramatically around the globe.

According to TeleGeography’s IP Transit Pricing Service, in Q2 2009, the median price of a fully committed GigE port (1,000Mbps) in major European and North American cities was approximately $10 per Mbps per month, after dropping approximately 20 percent per year for the past three years. While significant price differences once persisted between western and eastern Europe, IP transit prices in developing eastern European markets have come into line with western European rates. For example, median IP transit prices in Bucharest and Sofia are now comparable to rates in London and Paris.

However, IP transit prices outside of Europe and North America remain far higher, even in advanced markets. For example, the median price of a fully committed GigE port in Q2 2009 was $31 per Mbps per month in Tokyo, $52 in Sao Paulo, and $80 in Mumbai. While prices in many of these markets are falling rapidly, there’s little reason to expect they’ll ever reach the levels of Europe and North America. “High prices are not necessarily a reflection of an uncompetitive market,” observed TeleGeography analyst Erik Kreifeldt. “Higher prices may also simply reflect higher cost structures.”

Several factors account for the relatively higher cost of wholesale Internet service outside of Europe and North America. Most significantly, a far greater share of Asian Internet traffic must traverse higher cost submarine cables, while the vast majority of European and North American Internet traffic can be routed via terrestrial fiber networks at a lower cost. “Declining submarine cable prices will help reduce the cost of wholesale Internet access in Asia, Latin America and Africa,” said Erik Kreifeldt. “However, there’s little reason to think they’ll reach the levels seen in Europe and North America.”

TeleGeography’s IP Transit Pricing Service is a comprehensive source of IP transit pricing data, with more than 175,000 price quotes, covering nearly 40 port configurations in more than 55 major cities worldwide. Read more about the service at http://www.telegeography.com/products/ip_transit/index.php.

For further information contact:

Erik Kreifeldt

+1 (202) 741-0049

ekreifeldt@telegeography.com

TeleGeography’s IP Transit Pricing Service
http://www.telegeography.com/products/ip_transit/index.php