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End-User Traffic Rising, More Traffic Migrating to Private Networks

Internet Network

By Anahi RebattaAug 24, 2018

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What's on the horizon for the global internet? We have a few ideas.

International internet bandwidth and traffic growth has gradually slowed in recent years, but remains brisk. And IP transit price declines continue globally, but significant regional differences in prices persist around the world.

The combined effects of new internet-enabled devices, growing broadband penetration in developing markets, higher broadband access rates, and bandwidth-intensive applications will continue to fuel strong internet traffic growth.

While end-user traffic requirements will continue to rise, not all of this demand will translate directly into the need for new long-haul capacity.

Aggregate international internet capacity and traffic growth rates are slowing as the global internet matures and more traffic migrates to private networks. A variety of factors shape how the global internet will develop in coming years.

Transit Costs and Prices

Not only does the transit market exhibit both robust volume growth and sharp price decline, but the escalating bandwidth use actually lowers unit costs and enables the price decline, ensured by stiff competition.

The transit market is in the early stages of 100 Gbps port adoption but is poised to ramp up considerably in 2019, driving unit prices down further. Equipment costs for routers populated with 100 Gbps ports has reached parity with 10 Gbps on a unit basis. Once 10 Gbps inventory begins to clear, few incentives remain to invest in 10 Gbps platforms where scale warrants 100 Gbps.

Not only does the transit market exhibit both robust volume growth and sharp price decline, but the escalating bandwidth utilization actually lowers unit costs and enables the price decline, ensured by stiff competition.

Transit lags the transport market where 100 Gbps is well entrenched in the backbone and network operators are actively exploring higher line rates and next-generation optical transmission schemes. While single GigE sales have declined considerably from the heyday 10 years ago, 10 Gbps sales pervaded for years, suggesting that the next port size will not quickly displace the global market for 100 Gbps—despite brisk traffic growth.

Content Delivery Networks and Caching

The increased reliance on direct connections to content providers and the use of caching will continue to have a localizing effect on traffic patterns and dampen international internet traffic growth. As demand for content and applications grows in new locations, CDN nodes and caches will be deployed into these areas.

While the increase in broadband users and access rates will continue to drive traffic growth in access networks, much of this growth may be managed locally within a network and may not lead to proportional increases in traffic on international links.

The Rise of Content Provider Networks

The largest content providers’ private networks are having a major impact on the growth of internet capacity requirements. The focus of backbone providers has started to facilitate interconnection with handful of large content providers who account for the majority of traffic.

As the content providers extend their networks into new locations, backbone operators will continue to optimize their topologies in response. 

As the content providers extend their networks into new locations, backbone operators will continue to optimize their topologies in response. In some cases, backbone operators may reduce capacity or shift capacity to new locations. Additional companies, including Akamai, Dropbox, and Oracle, are in the process building global networks, which will shift additional traffic away from the public internet. As a result, the pace of international internet capacity and traffic growth appears likely to continue a pattern of broad deceleration.

This content comes from TeleGeography's Global Internet Geography Research Service. This tool provides analysis and statistics on internet capacity and traffic, IP transit pricing, and backbone operators. 

 

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Anahí Rebatta

Anahí Rebatta

Anahi is part of TeleGeography's telecom infrastructure and voice traffic teams. She specializes in Latin America and the Caribbean regions.

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