IP transit prices are declining around the world, falling below USD1 per Mbps for high volume transactions in major markets. According to new data from TeleGeography’s IP Transit Pricing Service, intense competition, increasing demand for higher capacities, and technological advancements that handle greater throughput per bit expense are driving price reductions.
As buyers’ bandwidth requirements grow and they transition to higher capacity ports, the unit price they pay for transit decreases. For example, customers who paid the median price of USD13 per Mbps for a GigE port in London in 2008, are now seeing the median price of just USD1.50 per Mbps for a 10 GigE port. While median GigE and 10 GigE port prices have decreased at a compound annual rate of 28% and 30%, respectively, over the last five years, buyers making the transition between the two have obtained a steeper price decrease of 35%.
Similar trends are seen in other global hubs. In New York, GigE prices fell 24% over the past five years, while 10 GigE prices fell 27%. Customers transitioning from a GigE port bought in 2008 to a 10 GigE port would experience a slightly greater price decrease of 31%, paying the 2013 median price of USD1.71 per Mbps. In Hong Kong, GigE and 10 GigE prices fell 15% and 26%, respectively, but a customer making the transition between the two would see a price decline of 28%, and pay around USD7 per Mbps for the 10 GigE port.
‘The rapid decline in price per Mbps may appear alarming, but the total price of a large port still runs thousands of dollars per month,’ said TeleGeography analyst Erik Kreifeldt. ‘At USD1 per Mbps, the price of a full 10 GigE port is USD10,000 per month. Furthermore, robust demand growth helps neutralise the effects of price erosion on IP transit revenues.’
TeleGeography’s IP Transit Pricing Service is a comprehensive database of wholesale internet access price quotes by port capacity and committed data rate from nearly 50 carriers in over 80 cities around the world.
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