Many retail service providers, such as mobile operators, MVNOs, and cable broadband providers, rely heavily on wholesale carriers to transport and terminate their customers’ international calls.
Wholesale carriers terminated approximately 327 billion minutes of traffic in 2018, down 3% from 2017. While wholesale traffic declined in 2018, over the last 10 years it has seen a compounded annual growth rate of 3%.
Consequently, the ratio of international traffic terminated by wholesale carriers increased from 59% in 2008 to 72% in 2018. Traffic to mobile phones in emerging markets has historically spurred expansion of the wholesale market, and that demand continues to drive wholesale’s relative growth. In 2018 wholesale carriers terminated 86% of traffic to Sub-Saharan Africa, Central Asia, and South America, but only 54% of traffic to western Europe. Revenues on calls to sub-Saharan Africa grew 26% between 2011 and 2018, $2.4 billion to $3.0 billion. Conversely, revenues on calls to western Europe fell substantially from $1.2 billion to $900 million.
Consequently, the ratio of international traffic terminated by wholesale carriers increased from 59% in 2008 to 72% in 2018. Traffic to mobile phones in emerging markets has historically spurred expansion of the wholesale market, and that demand continues to drive wholesale’s relative growth.
Declining wholesale prices stabilized in 2015 and have inched up ever since. This had resulted in a modest increase in wholesale revenues between 2016 and 2017. But 2018's drop in wholesale volumes wiped away that gain.
As a result, revenues dropped last year to $13 billion, below the 2014 peak of $14.4 billion.
Wholesale operators make the bulk of their revenues in only a handful of regional markets. Africa, for example, received 9% of the world's wholesale traffic, but accounted for 34% of wholesale revenues ($4.4 billion.) Countries in the Middle East accounted for 6% of world wholesale traffic, but 12% of wholesale revenues ($1.6 billion).
Wholesale revenues are bolstered by a select set of low-traffic routes with stubbornly high prices.
Wholesale revenues are bolstered by a select set of low-traffic routes with stubbornly high prices. For example, the France to Tunisia route accounts for just 0.3% of international traffic, but, at $0.37 per minute, it provides 3% of all revenues. Thanks to low termination prices in Mexico, the U.S.-Mexico route serves as a converse example: that massive route represents 7% of all international traffic in the world, but only 0.4% of wholesale carrier revenues.
Patrick Christian is a Senior Research Manager with TeleGeography. He heads the Cloud and WAN Infrastructure research service. He also focuses on West African and European markets specializing in international bandwidth markets and internet infrastructure, WAN services, terrestrial and submarine cable systems, and international voice traffic analysis.