Wavelength prices fall, but price disparities still exist
New submarine cable construction and upgrades to existing systems have expanded capacity, increased competition, and lowered unit costs, driving down bandwidth prices around the world. However research from the Telecommunications analyst company TeleGeography, large differences in the cost of services exist across different submarine cable networks.
According to TeleGeography’s Wholesale Bandwidth Pricing Database, median 10Gbps wavelength prices on key international routes fell an average of 20 per cent between Q2 2013 and Q2 2014, and 22 per cent compounded annually since Q2 2011.
Despite universal declines, vast regional disparities persist, both in terms of absolute price and the rate at which they are falling.
Price erosion has been greatest in Asia and across the Pacific, as carriers upgrade to 40 and 100Gbps technologies, and new systems continue to enter service. Median 10Gbps lease prices on the Los Angeles-Tokyo and Hong Kong-Tokyo routes dropped 26 and 36 per cent in the past year, and 29 per cent annually over the past three years, to $16,000 and $16,042 per month, respectively.
Median 10Gbps wavelength prices on the Los Angeles-Sydney route, where cables have received major upgrades, declined 21 per cent in the past year, and 27 per cent annually over the past three years. At $95,000 per month, capacity remains expensive on the route, but two proposed new cables, growing competition, and the desire of current service providers to lock in customers with price incentives have already started to drive significant discounts.
Median 10Gbps wavelength prices between Miami and São Paulo fell 18 per cent annually since 2011, but are still comparatively expensive, at $72,000 per month. Several new cables are slated to enter service on this route in the next two years, making steeper price declines likely in the near future.
Price erosion has been much slower across the Atlantic. Median 10Gbps wavelength prices on the London-New York route have declined at a compounded rate of 11 per cent annually since Q2 2011, but fell just one percent between Q2 2013 and Q2 2014. The current median price of $8,000 per month is half that of comparable service on the Los Angeles-Tokyo and Hong Kong-Tokyo routes, and one-twelfth that of Los Angeles-Sydney.
‘Technological advances such as 40Gbps and 100Gbps drive the unit cost of bandwidth down,’ said TeleGeography analyst Brianna Boudreau. ‘At the same time, the ongoing liberalization of global telecom markets and infusions of capacity into ill-served parts of the world drive both demand and diversity of bandwidth buyers. Together, these forces will continue to result in increased bandwidth supply and lower prices throughout the world.’
With competition higher than ever it remains to be seen if the falling costs translate into a more homogenous pricing structure across the varying submarine cable networks.