Bandwidth Price (4)

I just want to comment this local report. This is written by Arif Pitoyo (Bisnis) citing Galumbang Menak (CEO Gema Lintas Benua - a local Internet Service Provider). Below, I would use "GM|AP" to refer to this report. Summary of the report + my comments:

• It is predicted that Internet bandwidth leasing cost decreases by 50% !
• The figure would be around USD 100 to USD 300 / Mbps ! (he talked about supply cost in Java, I guess) - for comparison, in 2000 Internet via satellite links cost around USD 12 - 15 mn (?? that expensive ?)
  
• In 2004, Moratel and Excelcomindo have built SDH microwave link Batam - Singapore (total capacity 2 STM-1; claimed to be the first link entirely owned by local company) - GM|AP said "because of this link, Internet bandwidth has decreased to around USD 6 mn/Mbps" (that expensive ??)
• In 2007, as an impact of several new cables, the cost is further reduced to USD 200 / Mbps at wholesale level, and to USD 300 - 500 / Mbps at retail level (?? USD 6,000,000 to USD 300 ... ???)
• As I read this : "Dalam tempo 3 tahun kembali terjadi penurunan lebih dari 95%. Harga 2007 hanya 5% dari harga 3 tahun sebelumnya ini merupakan penurunan harga yang paling drastis sepanjang sejarah,ujarnya" it's a bit clear, writing error! ... should be thousand not million!!

• "Pada saat ini di tingkat wholesale, harga bandwidth Internet adalah sekitar US$50-US$70/Mbps, dan harga ini sudah bertahan dan stabil sampai 3 tahun belakangan ini" (where? Jakarta ? - or just another typo?)
• "Bandingkan dengan harganya di negara lain seperti Jepang dan Hong Kong yang hanya senilai US$7-US$9/Mbps/bulan di tingkat wholesale. Harga transit termurah di dunia tentunya adalah di AS sekitar US$3-US$7/Mbps/bulan di tingkat wholesale" - I don't know whether GM|AP has used some results of a certain research company, but Primetrica said that IP transit (GigE full port) in Hong Kong cost around USD 36 - 37 / Mbps, in Tokyo around USD 45 / Mbps, in LA around USD 6 - 30 / Mbps!
  

• "Sementara harga Internet melalui satelit, dalam 3 tahun terakhir relatif stabil pada kisaran US$1.500-US$3.000/Mbps per bulan dan diprediksi terus bertahan mengingat satelit memiliki kendala kapasitas maksimum 48 transponder" - this seems ok!
  

By the way, why has Galumbang Menak used "Gema Lintas Benua" instead of "Moratel" ? Did he leave Moratel after Smart Telecom's majority share acquisition?

Bandwidth Price Points

According to Telegeography Research (2009B):

• Prices are declining due to growing supply, greater competition, liberalizing markets, and technological advancements
• Prices for higher-capacity products are dropping faster than lower-capacity products
• The more you buy, the less you pay per Mbps
• High capacity means high revenue
• Prices change in large steps
• Prices vary by geography, carrier, customer

Wholesale private lines (IPLC, etc.):

• Compound annual decline 3% - 12% (median private line prices 2005 - 2008)
• Prices vary by geography: different prices correspond to different market conditions (competition, supply/demand balance, etc); Hong-Kong - Tokyo price/km is 5x London-New York
• Price trens vary by capacity: larger capacity, greater decline
• Price per Mbps decreases with increasing capacity
• Prices vary by carrier: different prices correspond to different paths, market segments served, regional strengts, SLAs, local access ownership, etc.; price changes occur in steps up to 50%; CAGR ranges from 0% - 28%
  

IP Transit:

• Compound annual decline 16% - 26% (globally)
• Prices vary by geography : prices correspond to different costs of underlying transport and market conditions (competition, supply/demand balance, etc.); Rio de Janeiro is nearly 8x Los Angeles
• Prices vary by capacity: price per Mbps decreases with increasing capacity (a 10 Gbps port at $5 per Mbps is $600,000 annual revenue; FastE at $15 per Mbps is $18,000); Higher capacities, greater declines
• Prices vary by committed data rate (CDR): price pe Mbps decreases with increasing capacity; 200 Mbps CDR price is 54% higher per Mbps than full port (but 70% less revenue)
• Prices vary by carrier: different prices correspond to different market segments served, regional strengths, SLAs, local access ownership, etc.; price changes occur in steps of up to 50%; compound annual decline ranges 20% - 35%
  

IP VPN:

• Prices vary by geography: retail price trend is more stable than wholesale; CAGR ranges 5% - 23%
• Prices vary by carrier: prices vary due to different market segments served, regional strengths, SLAs, local access ownership, etc.
• Price changes occur in steps of up to 50%, but demonstrate some convergence - CAGR ranges 11% - 36%
• Price bundle includes value-added: port bandwidth remains dominant price component; other elements' proportion varies by region; less tied to commodity pricing dynamics
  

Other Notes:

• Shift to high-capacity products, which are declining in price more rapidly, compounds decline in revenue per bit
• Price declines outpaced by demand growth, implying growing revenue
• Anecdotal price is not necessarily the market price (nor is the median price)
• Other terms, conditions, and relationships can affect actual price paid for capacity
  

Bandwidth Price (3)

Recently, Primetrica published new data for their IP transit pricing service and stated that "prices for wholesale Internet access (IP transit) are falling rapidly, but continue to vary dramatically around the world". How much should IP transit cost ?? Currently, according to Primetrica :

• Median monthly IP transit prices for 1,000 Mbps Gigabit Ethernet (GigE) ports in major U.S. and European cities ranged from USD 10 to USD 14 per Mbps in Q2 2008
• The median price of a GigE port in major asian cities ranged from USD 30 per Mbps month in Seoul to USD 45 per Mbps per month in Tokyo
• IP transit service in Latin America is even more expensive, with median GigE port prices ranging from USD 73 per month in Buenos Aires/Sao Paulo to USD 86 per month in Santiago
  

The curves below show rather old Primetrica's sample pricing data (Q3/2006). Median monthly lease price for STM-1 (this time circuit, not IP transit) according to this record, was :

• around USD 5,000 for trans-atlantic connection (London-New York)
• around USD 19,000 for trans-pacific connection (LA-Tokyo)
• around USD 11,000 for Hongkong-Tokyo connection
• around USD 15,000 for Hongkong-Singapore connection
  

Source/Courtesy Telegeography

Asian IP Bandwidth Price (Source/Courtesy Pacnet)

Bandwidth Price (2)

Early this year (2008), as quoted by some local newspapers, both APJII and Kominfo gave the following bandwidth price range

• before 2008: USD 2,200 - 2,500 / Mbps
  
• since Q1/2008: USD 1,300 - 1,800 / Mbps
  

One day in late 2007, Divakar Goswami (formerly Lirneasia, currently Deloitte ??) mentioned some numbers as given in the pictures below.

According to Divakar:

• Jakarta-Singapore connection costs USD 10/Mbps/km --> approx. USD 10,000 /Mbps (this shall be Indosat's price prior to 2005 ??)
  
• India-Singapore connection costs USD 0.5/Mbps/km --> approx. USD 2,000 /Mbps
• Indonesian intercity connection costs USD 10/Mbps/km (after a logical correction by myself) --> approx. USD 1,500 for Jakarta - Bandung
• Indian intercity connection costs USD 0.5/Mbps/km (after correction)

Taking this numbers as bases, approximate bandwith price ratio India:Indonesia is around 1:20 both for international or national long distance fiber connections.

Finally, although it depends strongly from marketing calculations, I observed that price tends to be non-linear. I'm not completely disagree with Divakar, but personally I would benchmark / compare price based only on port or Mbps rather than on Mbps/km.

Bandwidth Price Comparisons (Source/Courtesy Lirneasia/Divakar Goswami)

Bandwidth Price (1)

This first "Bandwith Price" thread will cover only the case in African market. It it based on the talk given by Michael Ruddy / Terabit.

The current, second "boom" in submarine cable market is not only happened in Asia and Transpacific segments, but also in Africa. One of the most prominent drivers for investment in fiber infrastructure is the currently-quite-high "bandwidth price" in the regions. According to Michael:

• Satellite connections cost approx. USD 5,000 / Mbps
  
• Fiber connections (using existing SAT-3 cable) cost varied: USD 12,000 / Mbps from Telkom South Africa, USD 6,000 / Mbps from Mauritius Telecom or EUR 1,550 / Mbps from France Telecom at Reunion Islands
  

There are currently two cable systems under supply contracts: East African Marine System (TEAMS - what is "T"??) and EASSy (East African Submarine-cable System). One of notable goals of these systems is to achieve "USD 500 / Mbps" :

• "Kenyan gov’t. says $500/Mbps. is achievable on TEAMS, and any operator who charges more than $700 all-inclusive will just be serving the cause of greed. - Bitange Ndemo, Kenyan information permanent secretary"
• "UUNet disagrees: $500 does not include interconnection to the Internet - Geoffrey Shimanyula, UUNet Kenya managing director, Nov. 2007"
  

Broadband : Penetration & Pricing

There might be several definitions for the term "broadband". Here I use this term to refer to services which run on channels / infrastructures other than those utilized by traditional voice services. Usually it should be faster than 64 kbps. Practically it denotes services using xDSL, FTTx, Cable/HFC or novel state-of-the-art wireless technologies. Some numerical data presented in this post are taken from Point Topic and REACH. Those are actually rather outdated (2004). But some characteristics concluded from those might remain similar and could be used as an approximation for our current situation.

As of 2004, the market share of installed broadband lines in APAC region is larger compared to that of the EMEA region or the American continent (see the picture). At that time, there are around 45 mn broadband lines / subscribers in the whole APAC region. This is about twice of the number of broadband lines in the whole America. This fact might have a direct or indirect impact on the pricing scheme. As you can see in the picture, bandwidth in countries like South Korea, Japan, China, Taiwan and Hong Kong is (much) cheaper than that in other countries. In Japan, the "champion" country in this case, one can have a 45 Mbps connection for USD 36 a month. Yes, okay, if we look at India, Malaysia, Singapore etc. the statement above is not (yet) applicable. But the global trend "faster but cheaper" has propagated and now reached those states. Hopefully soon, I could update this post with more actual data. Whether some of you have those already ?!

Domestic Bandwidth Price

According to APJII, the Indonesian ISP Association, this year the price of international Internet bandwidth in Indonesia tends to decrease (reported by detik.com on 29/January/2008). Last year the price was in the range of USD 2.200 - USD 2.500 for each Mbps. But since early 2008 it has been reduced to around USD 1.800 for fiber access and around USD 1.300 to USD 1.500 for satellite links.

Cheap enough? I don't think so. I guess the price in India or Malaysia is (much) cheaper. I don't have any figure right now. But last year, in an informal discussion with some key persons from a malaysian Internet player, the price ratio MY:ID is around 1:4. Right? Malaysian readers, please CMIIW ! Surely, I'm not talking about TM :-D. Otherwise, if you have access to the paid version of Telegeography databases, you can easily compare the prices and drop here a line :-D

Good news ? Maybe. I see that the most indonesian ISPs are moderate and innovate very slowly (if any). Such a price effect may or may not touch end-users. And if it indeed reaches the customers, it might take several months to propagate, or even worse.