As services providers transition to higher-capacity ports, the unit price they pay for transit has fallen sharply. IP-transit prices have dropped below $1 per Mbps for high-volume transactions in major markets, according to a new report from TeleGeography.
The median price for a GigE port in London, which in 2008 was $13 per Mbps, is now just $1.50 per Mbps for a 10 GigE port. The firm noted that while median GigE and 10 GigE port prices have dropped 28% and 30% per year, respectively, over the last five years, buyers transitioning between the two technologies have obtained a decrease of 35%.
Similar trends are seen worldwide. In Hong Kong GigE and 10 GigE prices fell 15% and 26%, respectively, but a customer making the transition between the two would see a price decline of 28%, and pay around $7 per Mbps for the 10 GigE port. In New York GigE prices fell 24% over the past five years while 10 GigE prices fell 27%. Customers moving from a GigE port bought in 2008 to a 10 GigE port would experience a slightly greater price decrease of 31%, paying the 2013 median price of $1.71 per Mbps.
“The rapid decline in price per Mbps may appear alarming, but the total price of a large port still runs thousands of dollars per month,” said TeleGeography analyst Erik Kreifeldt. “At $1 per Mbps, the price of a full 10 GigE port is $10,000 per month. Furthermore, robust demand growth helps neutralize the effects of price erosion on IP transit revenues.”