Customers continue to demand IP VPN connections under 10Mbps

28 Mar 2012

While carriers continue to expand their offering of high capacity IP VPN ports, customer demand remains strongest for connections under 10Mbps. According to new data from TeleGeography’s Enterprise Network Pricing Service, 88% of ports sold by carriers between Q1 2011 and Q1 2012 were 10Mbps or less. 54% of ports sold in the developed markets of North America, Europe, and Asia were less than 2Mbps, while 34% were between 2Mbps and 10Mbps.

Port sales in developing markets tilt even more strongly towards smaller ports. In Latin America, 91% of port sales were 10Mbps and below, with 48% less than 2Mbps and 43% between 2Mbps and 10Mbps. Middle East and African markets, which have some of the most expensive bandwidth in the world, experienced even higher demand for low capacity ports. In both regions, 80% of port sales were at capacities below 2Mbps.

Widespread availability and growing competition have driven down prices of lower capacity ports around the world. Between Q1 2011 and Q1 2012, median T-1 and E-1 port prices in major markets declined by an average of 17%. The median price of a best efforts T-1 port in New York fell 20% to USD275 per month, while E-1 median monthly lease prices declined 3% in Amsterdam to USD433, and 17% in Tokyo to USD678. In Sydney and Caracas, median monthly E-1 lease prices fell 22% and 26% to USD823 and USD844, respectively.

‘IP VPN solutions are typically implemented by customers with modest bandwidth requirements that need a managed solution between geographically dispersed work sites,’ said TeleGeography Research Director Rob Schult. ‘In contrast, high capacity ports are typically employed at network hub sites. Even though carriers are increasing their higher capacity offerings, we expect the majority of customer demand to continue to be for the lower-priced and lower capacity connections that are well suited for the needs of most of their sites.’

TeleGeography’s Enterprise Network Pricing Service is a database of international MPLS VPN, private line, and dedicated Internet access price benchmarks for corporate and retail customers.

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