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Most local access purchases near bottom of wide price ranges

11 Dec 2014

Local access prices vary widely, even within a given city. The highest price paid for a standard service like 10Mbps Ethernet is often five to ten times greater than the lowest price in the same city. However, data from TeleGeography’s Local Access Pricing Service suggest that most buyers should expect to pay a price closer to the low end of the price range than to the market high.

For example, in Amsterdam, prices paid for 10Mbps local access circuits in the second half of 2013 ranged from just USD68 to USD1,907 per month. While the high price was 28 times greater than the low, the bulk of customers purchased loops closer to the median monthly price of USD255. Similarly, Mumbai demonstrated a large range of monthly prices for 10Mbps loops, with a low price of USD130 and a high price nearly ten times that, at USD1,289. However, the median price was just 10% above the low, at USD143, indicating that most transactions were clustered tightly near the bottom of the range. London and Toronto also displayed a wide range of prices, from USD152 to USD713, and USD365 to USD1,380, respectively, but their median prices of USD290 and USD439 per month were both much nearer the bottom of the price range than the top.

This pattern also holds true in more expensive markets. In Sao Paulo, where the highest price of USD4,672 per month was 500% above the low of USD771, the median price was USD1,216, just 58% above the market low. Similarly, in Johannesburg, the high price of USD5,814 was over 700% greater than the low price of USD714, while the USD1,696 median was a more modest 137% above the low.

New York is a notable exception to this pattern. In H2 2013, the median price paid for 10Mbps Ethernet access circuits was USD1,162 per month, more than 500% above the low price of USD191, and nearer to the market high of USD1,724. This discrepancy may be attributable to the relative immaturity of the US Ethernet market, because the pattern of median prices clustering in the low end of the price range does hold true for T-1 circuits in New York. As the US Ethernet market catches up with those of Europe and parts of Asia, median prices should start to fall.

‘While horror stories about exorbitant local loop costs abound, buyers should recognise that transactions at the top end of the price range generally reflect unique circumstances, or buildings that lack competitive providers,’ said TeleGeography analyst Greg Bryan. ‘Most local access circuits connect to customer sites in buildings that are served by multiple providers, so median prices reflect these more competitive rates.’

TeleGeography’s Local Access Pricing Service provides local access price benchmarks and trend analysis for Ethernet and leased line circuits in hundreds of metro areas in 146 countries around the world. Data reflect over 65,000 actual transaction prices.

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