27 Comments

Summary:

Sure it’s not like back in the early 2000s, when those crooks from Enron were driving the prices of bandwidth down into the ground, but even today prices on Internet bandwidth continue to fall. If you are a consumer, however, there’s a good chance you’re wondering […]

Sure it’s not like back in the early 2000s, when those crooks from Enron were driving the prices of bandwidth down into the ground, but even today prices on Internet bandwidth continue to fall. If you are a consumer, however, there’s a good chance you’re wondering what I’m talking about — after all, broadband service providers like Comcast and Time Warner are talking about putting the meter on the bandwidth they serve up to residential subscribers.

What I’m talking about is wholesale Internet bandwidth that is sold to Internet services providers (ISPs) and content companies like Yahoo and Google. This is called IP Transit and it is sold at a rate of “per megabit per second per month” and often requires a monthly bandwidth commitment. Cogent Communications, Level 3 Communications, Tata Communications, Global Crossing and AT&T are some of the more well-known IP Transit providers.

Today research firm Telegeography came out with a report that shows the price of wholesale Internet access (IP transit), while varied around the globe, are still in decline. Here are some facts.

  • GigE port prices in major U.S. cities fell 30-40 percent between Q2 2007 and Q2 2008. Median monthly IP transit prices for 1,000 Mbps Gigabit Ethernet (GigE) ports in major U.S. and European cities ranged from $10-$14 per Mbps in Q2 2008.
  • GigE port prices in Latin American cities declined a more modest 15-20 percent for the same period. Median GigE port prices range from $73 per month in Buenos Aires to $86 per month in Santiago.
  • Prices for GigE ports in major Asian cities in Q2 2008 ranged from $30 per Mbps month in Seoul to $45 per Mbps per month in Tokyo, higher than the U.S. or Europe. The price declines were around 30 percent.

  1. Thanks, this is really interesting.

    Share
  2. What does metering have to do with the price per throughput?

    Time Warner and Comcast are increasing their advertised (and even delivered) speeds while introducing metering, after all.

    Decreased prices for backbone speeds doesn’t much affect last mile capacity, anyway.

    Share
  3. Om, at the end it is following the exponential growth of performance/costs that Ray Kurzweil predicts for most technologies: doubling the capacity/$ every year. It is the equivalent of the Moore’s law applied to communications. Read more
    http://disruptionmatters.com/2008/09/23/telecom-at-the-speed-of-moores-law/

    Share
  4. hopefully this will trickle down to consumers at some point! Or am I just a lousy shopper?!

    Share
  5. @John Thacker That is exactly what I was saying. You just said it better. I think when you read my headline, you would simply wonder why my bills are going up. ;-)

    Share
  6. [...] Malik just posted a piece on the prices of wholesale Internet bandwidth specifically Om writes.. the wholesale Internet bandwidth that is sold to Internet services [...]

    Share
  7. [...] to new data from research firm Telegeography, the global cost of wholesale bandwidth continues to drop. Among other findings, the report [...]

    Share
  8. Is there a discount when you’re using many gigaE ports?

    I can imagine companies like and google and youtube to use a few hundred of these ports in their datacentres.

    Share
  9. and now from the US carriers, 10GigE’s are now down in the low-single digits to $4/mbps.

    Share
  10. Hopefully, as prices go down, things will move away from prepaid mobile to prepaid mobile broadband.

    I’d love to pay to not have a contract, but still be able to use my laptop in the airport or in a remote place where a cell signal is possible.

    Share
  11. [...] Already we are seeing speed and data caps being instituted by these gatekeepers even though the wholesale rates for Internet bandwidth is dropping across the [...]

    Share
  12. [...] Truth: Stock Hits $350 Sam Diaz: Trying to increase productivity? Send your employees home. GigaOm: Wholesale Internet Bandwidth Prices Keep Falling Photos: Messenger returns to Mercury Christopher Dawson: Google is your [...]

    Share
  13. The funny thing is that as part of the overall costs of running a network the cost of IP-Transit are only very limited. Most of the money is in Capex. Given a good peering and transit mix and some careful oversubscription the cost of Transit per customer would be somewhere in the dollar per month range for most ISP’s. (Back of envelope, no hard calculation) Certainly for the likes of AT&T they are on the receiving end of most transit deals and do not pay for transit to others as they are a Tier 1 provider.

    Actually come to think of it… dropping income from transit deals might drive the likes of AT&T to put the squeeze on customers to get more money on that end of the two-sided market.

    Also have a look at this peering and transit explanation (yes, by me)
    http://arstechnica.com/guides/other/peering-and-transit.ars

    Share
  14. [...] Wholesale Internet Bandwidth Prices Keep Falling – GigaOM [...]

    Share
  15. @John Thacker

    But metering isn’t really about last mile capacity, that’s just the carriers’ Big Lie. Metering is a tool to keep profits high (keep consumer Internet access constant while carrier’s price falls) and make it harder for TV over Broadband to compete with TV over cable/satellite. That carriers are so determined to ration access to the Internet is surely one of the factors driving falling Internet access prices.

    Share
  16. @Rudolf

    You assume a level of integration within these companies that isn’t there. The last mile network people are just another customer to the backbone guys and the backbone guys are just an ISP they are forced to deal with to the last mile guys. The rates charged to the last mile guys are pretty arbitrary, as after all the backbone guys have a monopoly. The benefits of good peering deals are not passed on to the last mile guys — they’re used to offset the backbone O&M. By the same token, loss of peering revenue will not be passed directly on to the customer. Instead it will be reflected in a lower O&M budget. The customer will feel it in terms of reduced quality of service (reduced support, slower network upgrades, longer turnarounds on field service requests, etc.). Remember, at the corporate level; sales makes money, operations costs money.

    Share
  17. To the commenter who wanted mobile broadband on a month to month basis. such a service exists and I use it. I have had it about two months so far and am very pleased. It costs $60 a month, no contract or deposite or anything. You can read about it at the following link
    http://www.millenicom.com/mobilebroadband/

    There is also info on DSL Reports just search their site for it.
    Enjoy!

    Share
  18. The fall in prices of IP transit reflects the reduction in costs of providing IP bandwidth and to a certain extent – at least in the US – increased competition, and thus, marginal pricing. The likelihood of this getting translated (proportionally) into retail broadband prices is low.

    For a new broadband network (i.e. new access) – true in many developing countries that either have no copper or haven’t unbundled their local loop, Internet bandwidth contributes just about 20-30% of total cost; as content becomes more local, this proportion reduces further. Simultaneously, the cost of laying and/or upgrading last mile is going up.

    It is a matter of time before backbone networks – even in over-supplied regions – run out of capacity and will need additional investments. At this point in time, about $5-8 billion is being invested in new submarine cable projects in Asia-Pac, Middle East, Africa, etc. Ten to twenty times more will be needed in enhancing access networks. Fixed rate, unlimited download packages cannot support such investments – undoubtedly, the cost of using Broadband in many markets incl. USA will go up in the next couple of years.

    Share
  19. Om – In the list of ‘..the more well known IP Transit providers’ I find it iteresting that you leave of Sprint. Are you implying that Sprint is either not well known, or not an IP Transit provider? The answer to both should be no. Sprint, as a Tier 1 ISP should make your list as they even provide transit to some of the providers you listed. The point of your article though, is right on. Competition and comodity based nature of the IP Transit market will continue to drive prives lower.

    Share
  20. [...] Already we are seeing speed and data caps being instituted by these gatekeepers even though the wholesale rates for Internet bandwidth is dropping across the [...]

    Share
  21. It’s been awhile since this discussion was talked about and I haven’t seen any significant decrease in my bandwidth bill. How about yours?

    Share
  22. Do the Math... Tuesday, August 4, 2009

    If everyone whining did the simple math, they’d all shut up about how they are being robbed by the ISP’s…

    If an ISP is charging you $50/month for 10Mbps speed and has to pay $14/Mb for transit costs, how are you getting it so cheap?

    The answer is that the industry utilizes a mathematical model (usually 4:1). Using such a model then shows that they are receiving $200/month for the 10Mb they are selling. Which if the 10Mb costs them $140/month, then they are making $60/month in Gross revenue, minus all the expenses they have.

    Now you add those who want to utilize P2P 24/7/365, they either have to spend more for bandwidth or they will charge you more OR cap those who are abusing the network relationship.

    Makes perfect sense to me…..

    Share
  23. [...] were ever going to make a decent profit from Internet-based telephony. But with bandwidth prices decreasing worldwide at a fast rate, it makes a lot of sense for Skype to at least consider moving into web applications [...]

    Share
  24. [...] 今日までSkypeは、もっぱらデスクトップとモバイルのソフトを使ってインターネット上のピアツーピアの起呼を行っている。これは意外なことではなく、Skypeがスタートした2003年ごろは、通信帯域の費用が今よりも桁違いに高くて、インターネット電話でまともな利益を上げるためには専用のデスクトップアプリケーションを使わざるをえなかった。しかし帯域の価格が急速に全世界的に低下するに伴い、SkypeはWebからでも十分使えるのではないか、という話になってきた。そのための早道は、Web上の既存の通信〜コミュニケーションサイト、TokBox、PalTalk、Tinychatなどを買うことではないだろうか。 [...]

    Share
  25. [...] were ever going to make a decent profit from Internet-based telephony. But with bandwidth prices decreasing worldwide at a fast rate, it makes a lot of sense for Skype to at least consider moving into web applications [...]

    Share
  26. [...] 2008, the cost of IP transit, which is the wholesale bandwidth that service providers purchase, declined 30 to 40 percent per gigabit Ethernet port in major U.S. [...]

    Share

Comments have been disabled for this post