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Summary:

Good news for anyone shipping a bunch of bits around the world. IP transit costs are down and are dropping more rapidly. But this doesn’t mean cheaper broadband for most consumers given the lack of competition in the middle and last mile access businesses.

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IP transit costs are down, which means it costs less to stream bits from Netflix, Google and any other web traffic across the ocean and major land masses. According to new data from TeleGeography, the prices are not only dropping, but are doing so more rapidly from the second quarter in 2011 to the second quarter in 2012.

Telegeography doesn’t explain why this occurring, but a rash of new investment and new transit routes coming online in the last year are probably helping drive down costs. For example the cost of a 1GigE port in London has dropped 57 percent to $3.13 per Mbps while the same ports in New York City have dropped 50 percent year over year to $3.50 per megabit. And Telegeography says that in few places in the world does transit cost more than $100 per megabit.

As for why this matters, it means that it costs less to deliver bits across undersea and overland cables. That’s great for big companies that buy a lot of bandwidth, but it’s not something that consumers will necessarily see benefits from. In many parts of the world, because last mile and middle mile access is not as competitive the lowered cost for transit don’t reflect in savings on the end consumer’s broadband bill. But for investors in companies moving a lot of bits around this is good news.

  1. Richard Bennett Monday, August 6, 2012

    Compare the average price per Mbps at the home today to the prices five, ten, and fifteen years ago and you’ll find that prices are indeed falling. You don’t see it on your bill because you’re not looking at the speed.

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