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?

Facebook Infrastructure Needs

Facebook has experienced a phenomenal growth. According to datacenterknowledge.com (03/2009):

• Facebook has been adding more than 600,000 new users a day in recent months; it just surpassed 200 mn users
  
• More than 24 percent of U.S. Internet users have Facebook accounts, as do 43 percent of the online audience in the UK
• The company may be spending as much as $1 million a month on electricity to power its servers and data center space
• Facebook hosts more than 10 billion photos posted by users

This all adds up to an enormous amount of data to store, manage and move across the Internet. And this is why Facebook needs more data center space.

Facebook Data Center:

• ACC4 (Ashburn, Virginia); DuPont Fabros? --> 10,000 square feets (929 square meters)
• ACC5 reserved (Ashburn, Virginia); DuPont Fabros? --> 20,000+ square feets; 6 MW power
• Digital Realty Thrust Q4/2008; location unknown, but DRT owns numerous data center properties in Europe --> could be strategical partnerships for expanding Facebook to overseas
• Terremark (Santa Clara - entire space) 02/2008
• Switch & Data (Palo Alto)
  

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