1 Why Smart People Do Stupid Things: Submarine Cables, Network Oversupply, and the Inexorable Decline of IP Transit Prices Tim Stronge TeleGeography NANOG 62
2 Introduction Hello. My name is Tim. I come in peace.
3 How Carriers See the Internet Internet Customer Touchpoint Solutions! Stakeholder
4 How Carriers See the Internet Internet
5 Topics to Cover Where is new infrastructure investment occurring? Why is there new cable investment occurring? Is it truly a case of people doing stupid things? Will this new investment push down prices? Will we ever reach a global bandwidth "singularity" in which transport and IPT will be priced the same no matter the location?
6 From a 10G to a 100G World Potential Capacity per Fiber Pair on FALCON Cable 59 x 100 Gbps! 40 x 40 Gbps! 64 x 10 Gbps! 96 x 10 Gbps!
7 Lots of Investment in Old Cables
8 Trans-Atlantic Potential Capacity Potential Capacity as Currently Announced by Operators
9 Trans-Atlantic Potential Capacity Potential Capacity if 100 x 100G Wavelengths per Fiber Pair
10 So No One is Bothering to Build New Cables Right? Wrong.
11 Construction Cost of New Submarine Cables by Region,
12 Topics to Cover Where is new infrastructure investment occurring? Why is there new cable investment occurring? Is it truly a case of people doing stupid things? Will this new investment push down prices? Will we ever reach a global bandwidth "singularity" in which transport and IPT will be priced the same no matter the location?
13 Why Build New Cables? The Dumb Reasons National pride Corporate pride (for some companies, leasing capacity is not "cool") 3 rd -party developers look at a cable map and see empty space without any lines
14 Why Build New Cables? (cont d) The Not-Dumb Reasons Capacity exhaustion Connecting new markets Providing physical diversity Supplying niche markets (trans-atlantic financials, oil/gas, mining) Economies of scale of ownership Microeconomic logic macroeconomic logic A company may want to build a cable of its own even if there's plenty of spare capacity in the market.
15 Planned Cables: Brazil-Europe
16 Planned Cables: Hibernia Express
17 Planned Cables: Trident
18 Planned Cables: FASTER
19 Topics to Cover Where is new infrastructure investment occurring? Why is there new cable investment occurring? Is it truly a case of people doing stupid things? Will this new investment push down prices? Will we ever reach a global bandwidth "singularity" in which transport and IPT will be priced the same no matter the location?
20 Are Transport Prices Falling? [Yep.] Monthly 10 Gbps Wavelength Lease Price,
21 Regional Price Differences Narrow 10 Gbps Wavelength Price Multiples over London-New York
22 What About Convergence Elsewhere? 10 Gbps Wavelength Price Multiples over London-New York
23 Let s Not Get Carried Away Median 10 Gbps Wavelength Prices per Month, Q Route Price London-New York ~ $7k Los Angeles-Tokyo ~ $18k Miami-Sao Paulo ~ $55k London-Mumbai ~ $105k London-Johannesburg ~ $250k
24 IPT vs. Transport Prices: Asia Monthly Price per Mbps for 10GigE Port and 10 Gbps Wavelength
25 IPT vs. Transport Prices: Americas Monthly Price per Mbps for 10GigE Port and 10 Gbps Wavelength
26 Topics to Cover Where is new infrastructure investment occurring? Why is there new cable investment occurring? Is it truly a case of people doing stupid things? Will this new investment push down prices? Will we ever reach a global bandwidth "singularity" in which transport and IPT will be priced the same no matter the location?
27 Singularity in Sight?... Not Exactly 10 GigE IP Transit Price Multiples Frankfurt
29 How Long till Price Convergence? [For Fun] What Happens if We Apply CAGR to Future Years?
33 What Factors Prevent IPT Price Convergence? IPT prices often reflect the cost of transport to a hub country Higher transport prices à higher IPT prices Lack of IP backbone provider competition IPT providers offering low-price service do not exist in each city Unfavorable regulatory environments Expensive backhaul/cross-connects
34 Conclusions Lots of new cables, capacity on their way Some built for stupid reasons (e.g., national pride) Most built for solid corporate reasons (e.g., carriers/isp/content providers building to handle internal traffic) Prices faster falling as a result IPT price declines roughly match transport price declines Prices falling everywhere, but we are not moving to a single, universal price
35 A Quote to Inspire MataHmeH masachnis. Ancient Klingon Proverb To survive, we must expand.
36 Thanks for Listening Tim Stronge Complaints hotline:
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