October 3, 2003 — (WEB HOST INDUSTRY REVIEW) — The median price for Internet protocol (IP) transit in U.S. and Western European cities slid 10-20 percent between the first two quarters of 2003, according to The Global Internet Geography Database and Report, a recent study published by research firm TeleGeography (telegeography.com). The report compiles market data and statistical coverage of the world?s largest Internet backbones, the traffic they carry and the carriers who operate them.
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According to the report, the continued decline of transit prices is the result of “cutthroat” competition and slower then expected growth in demand.
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The report rejected bankruptcy as a factor explaining the decline in prices. “There is little evidence that carriers re-entering the market after bankruptcy are using reduced debt levels to price services more aggressively than their competitors,” said senior research analyst Rob Schult. “The cheapest rates tend to originate from suppliers with low network utilization. Their attempts to gain market share and to get customer traffic onto the network frequently result in prices that are at or below marginal cost.”
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Shult added that demand was still healthy. “Demand for IP Transit continues to grow at a healthy rate, however IP transit price stability will remain elusive until further consolidation takes place.”
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The report also finds that prices between providers in cities are beginning to narrow.
