Blog Post

Wholesale Internet Bandwidth Prices Keep Falling

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.

27 Responses to “Wholesale Internet Bandwidth Prices Keep Falling”

  1. Do the Math...

    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…..

  2. 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.

  3. 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.

  4. Jesse Kopelman


    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.

  5. Jesse Kopelman

    @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.

  6. 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)

  7. tvlampsn

    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.

  8. Maximilian

    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.

  9. John Thacker

    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.