The Falling Cost of International Internet Data Transit and its Impact

The cost of sending and receiving international data is falling, with median 10Gbps Ethernet (10 GigE) port prices across primary global transit markets (e.g. London, Sydney) decreasing by an average of 14% (compounded annually) between 2012 and 2015, and 22% in the past year.

In particular the latest update from TeleGeography reveals that the median 10 GigE port price in London, which is said to serve as a “critical international traffic hub for Europe, Africa, and parts of Asia“, fell 16% compounded annually over the past 4 years to reach just 65p ($1.00) per Mbps (Megabit per second) per month in Q2 2015 and this is one of the cheapest in the world.

However the picture is somewhat varied, not least because prices will tend to fall at a slower rate in regions that are largely dependent on long-haul links to Europe or the US in order to gain access to international connectivity (e.g. in Sao Paulo most internet traffic is exchanged remotely in Miami).

Erik Kreifeldt, TeleGeography Analyst, said:

“While IP transit prices have reached extremely low levels in principal markets, they scale considerably higher outside of these core hubs. Transport costs remain a primary factor in this price disparity. As carriers expand IP networks and distributors push content closer to end-users, ISPs in remote markets will become less exposed to those costs.”

New links between countries are extremely expensive to develop, particularly subsea (submarine) connections that can require heavy duty and high capacity fibre optic cables to be laid over vast distances. But as the recent Hibernia Express deployment between North America and the UK / Ireland shows (here), new routes are slowly being built and this breeds competition that can put downward pressure on transit prices.

At the same time it’s not merely a matter of laying new cable and sometimes new technological developments, which help to upgrade the total capacity and performance of existing links, can also have a significant impact.

In the end both broadband ISPs and end-users benefit because the cost of moving data around the world is lower, although a big part of this may be mitigated by the fact that consumer and business data consumption is always rising through the availability of faster connections and higher quality content.