Global Internet Geography 2005 Executive Summary
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What does the Internet look like? Most engineering schematics show it as a
cloud. Yet the Internet is no ethereal, indescribable mystery; it is, in simple
terms, a series of interconnected private networks. Describing the number,
capacity, and complexity of these networks as they cross-political boundaries is
the purpose of Global Internet Geography. This report
catalogues both where the international links can be found and which companies
control them. But it also traces the market forces which effect the evolution of
the Internet’s architecture. By detailing which routes are choked with the most
traffic, which links are experiencing the fastest bandwidth growth, and which
regions will experience the steepest price declines, Global Internet
Geography offers a unique guide to this fast-changing market.
Overview of Contents
This update of Global Internet Geography builds on six years
of Internet statistics previously published by TeleGeography, and incorporates
greatly expanded data on international IP traffic, backbones, and transit
pricing. The report's first section focuses on the supply of Internet capacity,
including an examination of backbone operators and the physical, mechanical, and
financial aspects of provider interconnection. This section then provides
regional analyses of aggregate backbone capacity in Africa, Asia, Europe, Latin
America, and the U.S. & Canada.
The Traffic section analyzes average and peak traffic volumes on
international Internet routes and provides insight on traffic growth and
capacity utilization trends. Next, the Pricing section offers competitive
pricing analysis and trends for IP transit by region, followed by a section on
IP VPN services and pricing.
The second half of this volume begins with a statistical view of country
interconnection, showing route-by-route bandwidth connectivity tables for 65
countries. Average and peak international traffic for 45 of these countries is
also shown, which highlights how close providers in each country are to
exhausting available IP capacity. Global Internet Geography
concludes with a directory of over 300 backbone providers around the world,
including 67 two-page profiles detailing service offering and network topology.
A summary of our findings follows.
Traffic and Capacity
The rate of global Internet backbone expansion has varied dramatically every
year. In 2004, the capacity of international Internet links grew 46 percent,
well below the 78 percent growth experienced in 2003. The slower growth of
international Internet capacity in 2004 was not the result of weak growth in
only one region. In fact, every region experienced slower capacity growth in
2004 than in 2003. Asian Internet capacity grew the most rapidly rising 77
percent in 2004. The slowest capacity growth occurred on routes connected to the
U.S. & Canada, which only grew 37 percent.
International Internet traffic growth typically parallels Internet capacity
growth; however, they do not always move in perfect symmetry. TeleGeography's
latest research on international Internet traffic suggests that growth rates
have outpaced backbone capacity deployments. Based on data collected directly
from providers during 2004, aggregate average international Internet traffic
appears to be growing 115 percent annually. If traffic were to continue to grow
at this current rate, existing Internet capacity would be exhausted in less than
two years. Of course, Internet providers closely monitor utilization rates and
will likely begin to implement capacity upgrades during the next twelve months
to prevent excessively high levels of utilization.
Traffic growth, like capacity growth, is hardly consistent around the world.
Average traffic between Asian countries grew approximately 434 percent between
2003 and 2004, compared to 82 percent between European countries. During the
same period, average traffic across the Atlantic and Pacific grew 110 and 119
percent, respectively. These growth rates are impressive even if they do not
approach the “doubling every 100 days” calculation that was so often citied in
the Internet’s early days. If current growth rates persist, average traffic
across the Pacific and Atlantic links will exceed 2 Tbps by 2007 (see Figure 2.
Transoceanic Internet Traffic and Capacity, 2003-2007).
What applications are driving these growth rates? With this update,
TeleGeography inaugurates a new area of research on the composition of Internet
traffic by application type. Our initial findings show a surprising variation in
traffic mix. On some backbones, peer-to-peer (P2P) file sharing accounts for a
huge proportion of traffic, while on others P2P plays little role at all. One
thing is clear—at least for now, Web traffic still accounts for the largest
share of traffic on most networks.
Pricing
IP transit providers have struggled to adapt their prices to the turbulent
market conditions. Transit prices have fallen sharply in the past year. Between
Q2 2003 and Q2 2004, average STM-1 transit prices fell 49 percent in major
European cities, and 55 percent in major U.S. cities. Prices in Asia have
declined at a comparable rate, but remain twice as high as European and U.S.
prices (see Figure 3. STM-1 IP Transit Prices Declines by Region, Q2 2003-Q2
2004). Business restructuring has done little to halt the decline in prices.
Although some restructured carriers have been among the most aggressive with
price cuts, they are not necessarily the price leaders.
Outlook for Backbone Providers
The global Internet backbone market is beset with ruinous price declines and
brutal competition. If consolidation continues, some providers may stop offering
IP transit service in certain regions or cities, while other providers may exit
the transit business altogether. Narrowing the field of competitors may ease
competition and slow the precipitous price declines of recent years. However,
providers should take solace knowing that demand in many regional markets
appears to have grown rapidly enough to offset the effect on total market
revenues between 2003 and 2004. In fact, international Internet traffic growth
(a reasonable proxy for IP transit demand) was so rapid in some cities that
local revenues for IP transit appears to have increased substantially in 2004.
Evolution of Architecture
The U.S.-centric structure of the global Internet is rapidly changing. Today
more bandwidth links key European cities to each other than to the U.S., making
Western Europe the first hub to emerge from North America’s shadow.
Intra-regional links between Asian networks are also growing much faster than
any other region’s. As a result, the Internet’s global hub-and-spoke structure
has begun to diffuse, replicating itself within regions.
The Internet’s architecture is still evolving. Global Internet
Geography will continue to examine this architecture along with the
drivers of its evolution—traffic flows, network topology, and backbone
competition—with statistics and analysis derived from TeleGeography’s team of
experts and the ongoing cooperation of hundreds of service providers around the
world.
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Global Internet Geography 2004 Executive Summary
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