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Global Internet Geography 2005 Executive Summary


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 Internets 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.

Figure 1. Map of Major International Internet Routes, 2004
Notes: Map includes international routes with at least 5 Gbps of aggregate capacity. Figures represent Internet bandwidth connected across international borders to each country. Domestic routes are omitted. Data as of mid-2004.
Source: TeleGeography research PriMetrica, Inc. 2004
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 Internets 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).

Figure 2. Transoceanic Internet Traffic and Capacity, 2003-2007
Notes: Internet bandwidth and traffic projections beyond 2004 are based on the observed annual average traffic growth rate of 110 percent for trans-Atlantic and 119 percent for trans-Pacific between 2003 and 2004.
Source: TeleGeography research PriMetrica, Inc. 2004

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 clearat least for now, Web traffic still accounts for the largest share of traffic on most networks.


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.

Figure 3. STM-1 IP Transit Price Declines by Region, Q2 2003-Q2 2004


Notes: Prices represent average monthly price per Mbps excluding installation fees.
Source: TeleGeography research PriMetrica, Inc. 2004
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 Americas shadow. Intra-regional links between Asian networks are also growing much faster than any other regions. As a result, the Internets global hub-and-spoke structure has begun to diffuse, replicating itself within regions.

The Internets architecture is still evolving. Global Internet Geography will continue to examine this architecture along with the drivers of its evolutiontraffic flows, network topology, and backbone competitionwith statistics and analysis derived from TeleGeographys team of experts and the ongoing cooperation of hundreds of service providers around the world.


. Global Internet Geography 2004 Executive Summary


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