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Global Bandwidth Prices Are Converging. Somewhat.

Network Pricing

By Brianna BoudreauMay 5, 2020

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With the update of data and analysis within our Global Bandwidth Research Service comes a refreshed look at our network pricing intel.

Yes, operators are racing to keep revenue margins ahead of eroding prices, while bandwidth demand and supply continue to grow across global routes. Abundant supply and increasing competition have led to this robust price erosion throughout the global bandwidth market.

New 100 Gbps-equipped submarine cable systems and upgrades to existing networks have further lowered unit costs. And this has driven down both 10 Gbps and 100 Gbps wavelength prices. Across critical global routes, weighted median 10 Gbps and 100 Gbps prices fell an average of 14% and 23% compounded annually since 2016.

Bandwidth prices decline reliably. But prices are not the same throughout the world.

Our weighted median 10 Gbps lease price on the Frankfurt-London route comes in at just $724. Compare that to $18,000 for 10 Gbps between Los Angeles and Sydney. The cheaper intra-European route is shorter and benefits from more competition than the Australia-U.S. route. The comparison still clearly illustrates the range of prices between global hubs.

Weighted Median 10 Gbps Monthly Lease Prices on Select International Routes

Weighted Median 10 Gbps Monthly Lease Prices on Select International Routes

While differences persist, prices have converged somewhat over the past few years. Routes with historically high bandwidth prices are transforming into key inter-regional connectivity points with high demand growth, new supply, and competition. Price declines in these locations outpace the market, bringing them more in line with other core global routes.

One caveat to this is that while prices have converged, we don't expect the trend to lead to unified global pricing. Why? Fundamental differences in global network topology, underlying costs, and demand volumes continue to ensure bandwidth price differences. (For more on that, take a look at Alan Mauldin's examination of the great bandwidth price parity myth.)

With falling prices, the incentive to buy larger versus smaller circuits increases. In Q4 2019, carriers priced 100 Gbps wavelengths an average of 4.3 times higher than 10 Gbps for 10 times the capacity. That's down from 6.4 times more in 2015. 

With falling prices, the incentive to buy larger versus smaller circuits increases. In Q4 2019, carriers priced 100 Gbps wavelengths an average of 4.3 times higher than 10 Gbps for 10 times the capacity. That's down from 6.4 times more in 2015. 

Multiples vary by route, often corresponding with regional price differences. Shorter, intra-regional terrestrial links exhibit lower price multiples than longer, trans-Oceanic subsea connections. For example, in the figure below you can see that operators on Frankfurt-London and Los Angeles-New York report the lowest price multiples of the group. 

10 Gbps and 100 Gbps Wavelength Weighted Median Prices and Multiples on Select International Routes

10 Gbps and 100 Gbps Wavelength Weighted Median Prices and Multiples on Select International Routes

We also tend to see low multiples where 100 Gbps adoption is strong or in markets where 10 Gbps prices stabilize at higher rates. On the subsea routes of Los Angeles-Tokyo and London–New York depicted here, the low multiples of 4.3 and 4.5 are driven by two factors.

First, increasing demand continues to drive down 100 Gbps prices. Second, as demand shifts to higher capacities, sales of 10 Gbps circuits have moderated, resulting in more stable 10 Gbps prices.

 

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Brianna Boudreau

Brianna Boudreau

Senior Analyst Brianna Boudreau joined TeleGeography in 2008. She specializes in pricing and market analysis for wholesale and enterprise network services with a regional focus on Asia and Oceania. While at TeleGeography, Brianna has helped develop and launch several new lines of research, including our Cloud and WAN Infrastructure service and the SD-WAN Research Service.

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