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Global Internet Geography 2004 Executive Summary shim  

Internet traffic growth rates have been the subject of considerable speculation before, during, and after the dotcom boom. One common tenet of early Internet apocrypha stipulated that traffic was doubling every 100 days. Conversely, in the aftermath of the telecom sector implosion, conventional wisdom held that Internet traffic was increasing far more slowly than previously believed. In this reportGlobal Internet Geography 2004TeleGeography has assembled exclusive international Internet traffic and bandwidth data which uncover the state of the market and provide insights into its future.

This edition of Global Internet Geography builds on five years of Internet statistics previously published by TeleGeography, but also includes new data on international IP traffic and transit pricing. The report's first section focuses on the supply of Internet capacity, including an examination of suppliers and the physical, mechanical, and financial aspects of provider interconnection. The supply section then segments IP backbone product offerings and estimates the size of the global transit market. This section concludes with an overview of global Internet deployments and regional analyses of aggregate backbone capacity in Africa, Asia, Europe, Latin America, and the U.S. & Canada. The Traffic section analyzes volumes on international Internet routes and provides insight on traffic imbalances, growth, and capacity utilization. The Pricing section offers competitive pricing analysis and trends for IP transit by region.

The second half of the report presents route-by-route bandwidth connectivity tables for 57 countries and detailed, two-page profiles of leading international Internet providers. Global Internet Geography 2004 concludes with a directory of Internet backbone providers and Internet exchange points. A summary of our findings follows.


Despite the lingering malaise in the telecom sector, global Internet backbones evolved at a rapid pace during 2003. The international Internet capacity growth rate reaccelerated, increasing 74 percent for 2003, up from just 38 percent in 2002. The renewed growth came as a result of rapid network deployments in all regions. Asia led the way, growing 114 percent, while Latin America's capacity grew 105 percent (see Figure 1. International Internet Bandwidth Growth by Region, 2000-2003). Even the more mature Internet market of Europe grew faster in 2003 than in the previous year. Europe, which accounts for 78 percent of the world's cross-border bandwidth, experienced an international capacity increase of 67 percent, an increase over the 33 percent growth rate recorded in 2002.

Figure 1. International Internet Bandwidth Growth by Region, 2000-2003
Data as of mid-year.
Source: TeleGeography research PriMetrica, Inc. 2004


TeleGeography's first systematic research on Internet traffic suggests that growth rates are in fact remarkably robustat least on international routes. Based on data from the first quarter of 2003, international Internet traffic is growing at an annual rate of 67 percent. While this growth rate is lower than some may have predicted, international Internet traffic would double every 16 months if the first-quarter trend continues. Furthermore, the results of the research show that traffic is growing as fast as the underlying IP capacityindicating a rational approach to bandwidth deployment by network operators. As a result, TeleGeography predicts that trans-Atlantic Internet bandwidth will increase to over 1 Tbps by 2005 to keep pace with traffic growth (see Figure 2. Transoceanic Internet Traffic and Capacity, 2003-2006).

Figure 2. Transoceanic Internet Traffic and Capacity, 2003-2006
  2003 2004 2005 2006
Internet Bandwidth (Gbps) 388 648 1,082 1,806
Peak Internet Traffic (Gbps) 100 167 279 466
Average Internet Traffic (Gbps) 70 117 195 326
Internet Bandwidth (Gbps) 92 153 256 427
Peak Internet Traffic (Gbps) 28 47 78 130
Average Internet Traffic (Gbps) 20 33 56 93
Notes: Traffic projections beyond 2003 assume 67 percent annual average traffic growth and constant peak-to-average traffic ratios. Internet capacity estimates assume 67 percent annual growth.
Source: TeleGeography research PriMetrica, Inc. 2004


Transit pricing is rarely transparent. Even comparisons of list priceswhich can exceed market prices by a factor of threeare in short supply. Based on anonymous survey research, TeleGeography has collected wholesale IP transit prices for access to major backbones. Not surprisingly, the price of IP transit has fallen significantly in recent years. TeleGeography research reveals that, in the second quarter of 2003, the median price of IP transit in London continued to fall, declining to $100 per Mbps for a 155 Mbps commitment (see Figure 3. Median STM-1 IP Transit Prices in London, 2000-2003). The U.S., however, has the lowest and most uniform prices for IP transit. Unlike in Europe, where prices still vary among cities, transit prices tend to exhibit parity across major U.S. cities. Prices in developing transit markets in Asia have much further to drop before reaching levels similar to Europe and the U.S.

Figure 3. Median STM-1 IP Transit Prices in London, 2000-2003
Notes: Data prior to 2003 is based on prices on the Band-X London IP Transit Exchange.
Source: TeleGeography research and Band-X Ltd. PriMetrica, Inc. 2004

Our comparison of pricing strategies disproves a common theory on the effect of bankruptcy in the market. There is little evidence, thus far, to support the widespread belief that carriers coming out of Chapter 11 bankruptcy are using their reduced debt levels to price services more aggressively than rival carriers. Companies that have been through bankruptcy are rarely the lowest-priced provider in the markets surveyed by TeleGeography. Often, companies that are on the edge of bankruptcy are the ones charging the lowest transit prices.

Making a Comeback

After the slow pace of growth in 2002, the supply of International Internet bandwidth resumed rapid growth during 2003. But will this rate of growth continue? In theory, international Internet traffic on current networks could double before users see a serious degradation in network performance.

Will providers let deployments slip while traffic catches up to capacity? Probably not. However, if consolidation continues, some providers may withdraw IP transit services from certain regions or cities, while other providers may exit the transit business altogether. Narrowing the field a bit further could have a stabilizing impact on prices. So far, this has not happened.


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 (C) 2001 Alexey Kondrashov