| Global Internet Geography 2004
Executive Summary |
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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 report—Global Internet
Geography 2004—TeleGeography 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.
Supply
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.
Traffic
TeleGeography's first systematic research on Internet traffic suggests
that growth rates are in fact remarkably robust—at 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 capacity—indicating 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).
Pricing
Transit pricing is rarely transparent. Even comparisons of list
prices—which can exceed market prices by a factor of three—are 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.
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. |
