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Wavelength prices tumble, while geographic disparities persist

5 Nov 2014

New submarine cable construction and upgrades to existing systems have expanded capacity, increased competition, and lowered unit costs, driving down bandwidth prices around the world. According to TeleGeography’s Wholesale Bandwidth Pricing Database, median 10Gbps wavelength prices on key international routes fell an average of 20% between Q2 2013 and Q2 2014, and 22% compounded annually since Q2 2011. Despite universal declines, vast regional disparities persist, both in terms of absolute price and the rate at which they are falling.

Price erosion has been greatest in Asia and across the Pacific, as carriers upgrade to 40Gbps and 100Gbps technologies, and new systems continue to enter service. Median 10Gbps lease prices on the Los Angeles-Tokyo and Hong Kong-Tokyo routes dropped 26% and 36% in the past year, and 29% annually over the past three years, to USD16,000 and USD16,042 per month, respectively.

Median 10Gbps wavelength prices on the Los Angeles-Sydney route, where cables have received major upgrades, declined 21% in the past year, and 27% annually over the past three years. At USD95,000 per month, capacity remains expensive on the route, but two proposed new cables, growing competition, and the desire of current service providers to lock in customers with price incentives have already started to drive significant discounts.

Median 10Gbps wavelength prices between Miami and Sao Paulo fell 18% annually since 2011, but are still comparatively expensive, at USD72,000 per month. Several new cables are slated to enter service on this route in the next two years, making steeper price declines likely in the near future.

Price erosion has been much slower across the Atlantic. Median 10Gbps wavelength prices on the London-New York route have declined at a compounded rate of 11% annually since Q2 2011, but fell just 1% between Q2 2013 and Q2 2014. The current median price of USD8,000 per month is half that of comparable service on the Los Angeles-Tokyo and Hong Kong-Tokyo routes, and one-twelfth that of Los Angeles-Sydney.

‘Technological advances such as 40Gbps and 100Gbps drive the unit cost of bandwidth down,’ said TeleGeography analyst Brianna Boudreau. ‘At the same time, the ongoing liberalisation of global telecom markets and infusions of capacity into ill-served parts of the world drive both demand and diversity of bandwidth buyers. Together, these forces will continue to result in increased bandwidth supply and lower prices throughout the world.’

TeleGeography’s Wholesale Bandwidth Pricing Database provides more than 230,000 anonymous carrier price quotes for over 230 key routes for bandwidth products ranging from 2Mbps E-1 circuits to 100Gbps wavelengths.

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