What Drives International IP VPN Pricing?

16 Mar 2010

New data from TeleGeography’s Enterprise Network Pricing Service show that the telecom cost of connecting offices varies widely around the globe, with some cities offering far more business-friendly environments than others. When looking to link up offices in different parts of the world, businesses are increasingly turning to IP-based Virtual Private Networks (IP VPNs), a flexible and frequently lower-cost alternative to traditional private lines. TeleGeography surveyed carrier prices in 102 cities worldwide, and found that carrier fees vary significantly. Connecting to some cities can be a surprisingly expensive proposition.

IP VPN port charges are generally lowest in major cities in the U.S. and Europe. The median monthly price of a 1.5-Mbps T-1 port in New York was USD377, while the price per month of a slightly larger 2-Mbps E-1 port in London was USD532 per month—almost identical in terms of price per Mbps. Prices tend to be higher outside North America and western Europe. In Hong Kong, a well-served and competitive market, the median monthly port charge for an E-1 was USD753. In the less competitive markets of Sao Paulo and Beijing, E-1 ports cost USD1,249 and USD2,310, respectively. And in Dubai, the median price of an E-1 connection was an astonishing USD14,683.

The main factors determining international IP-VPN prices are the underlying cost of international network capacity and the competitiveness of the local communications market. For example, while Hong Kong’s telecom market is fiercely competitive, much of Hong Kong’s international IP traffic is routed over submarine cables, which raises carriers’ relative costs. Consequently, service providers charge more for VPN service in Hong Kong than they do in London.

The high cost of VPN service in Dubai is a reflection of the other key driver of costs: local competition. The local telecom market in the UAE is uncompetitive, and, despite adequate submarine cable supply, enterprise providers must pay high local access charges to connect customers in Dubai to their network. ‘We are conditioned to think of global IP networks as ubiquitous and uniform, yet local access regulations and regional transport costs remain critical factors that drive the cost of connecting businesses in a city,’ said TeleGeography analyst Gregory Bryan.

TeleGeography’s Enterprise Network Pricing Service provides in-depth data and expert analysis of pricing trends for international IP VPN, retail private line, and Dedicated Internet Access (DIA) services. To find out more and to download product samples, please visit: http://www.telegeography.com/product-info/enterprise_pricing/index.php.

To speak with an analyst, please contact us at +1 202-741-0042, or email press@telegeography.com.

TeleGeography's Enterprise Network Pricing Service