Capacity and Traffic Trends

Transcription

1 International bandwidth demand between Australia and Asia and the U.S. grown considerably over the past few years, compelling providers to invest in upgrading submarine cable systems and reducing the cost of capacity in the region. Where geographic isolation, distance, and limited competition once caused it to be amongst the most expensive globally, these recent developments have brought the market closer to other key global routes. This Bandwidth Pricing Report details the changes in supply and demand in Australia and the Pacific and analyzes the impact of recent network upgrades, expansion plans, and increased competition on prices in the region. Capacity and Traffic Trends Australia, New Zealand, and the South Pacific continue to experience strong international bandwidth growth. Cables connecting New Caledonia, American Samoa, French Polynesia, Micronesia, the Marshall Islands, and Tonga have all come online since 2008, in some instances enabling islands to reduce dependence on satellite communications for the first time. Operators continue to meet demand growth with upgrades to existing cables and numerous potential new cables are under discussion. Australia has generated considerable growth in international bandwidth demand despite its relatively slow broadband subscriber growth. From 2010 to 2014, international bandwidth usage in Australia increased over four-fold from 456 Gbps to 2.1 Tbps, a compound annual growth rate of 46 percent. New Zealand s international bandwidth usage surged, with a compound annual rate of 60 percent between 2010 and 2014, to reach 476 Gbps (see Figure: International Bandwidth Usage for Australia and New Zealand, (Gbps)). 1

2 FIGURE 1 International Bandwidth Usage for Australia and New Zealand, (Gbps) CAGR Australia ,440 2,087 46% New Zealand % Notes: Data represent used bandwidth connected across international borders and excludes domestic bandwidth. Source: TeleGeography Household penetration in Oceania reached 69 percent in 2014, ranking behind only the United States at 95 percent, and ahead of Europe and Asia, at 65 percent and 32 percent, respectively (see Figure: Australia And New Zealand, Household Penetration, ). The subscriber growth rate in Australia and New Zealand has experienced a compound annual growth rate of 5 percent between 2010 and 2014, adding 1.3 million subscribers, for a total of 7.7 million broadband subscribers. The growth rate was similar in the past year, at 4 percent between 2013 and Consistent increases are partially due to the continued rollout of Australia s national broadband network (NBN) and New Zealand s Ultra-fast Broadband (UFB) network. Rollout of the NBN continues to accelerate. After passing only 41,000 homes by mid-2012, the network has passed almost 779,000 homes by the end of 2014, with over 322,000 premises activated. In New Zealand, rollout will continue until 2019, with schools, businesses, and areas with poor connectivity receiving prioritization with the roll-out. Exact locations and timeframe for the UFB rollout is still being determined. 2

3 FIGURE 2 Australia And New Zealand, Household Penetration, Source: TeleGeography Submarine Networks Even with the flurry of upgrades, the Australia & Pacific subregion is a hotbed of potential new submarine cables. There is strong interest in an additional cable from western Australia to Southeast Asia. Currently only SeaMeWe-3 connects these two regions. The western coast of Australia is home to two cable projects, the Australia Singapore Cable (ASC) and APX- West, that would connect Singapore, Jakarta and Perth. ASC hopes to enters service in Q4 2016, while APX-West has a target in-service date of Q A third proposed cable, Trident Subsea Cable hopes to link western Australia to Singapore via Indonesia by Q Trident s plans differ from the other two systems as it would interconnect with a branching unit on the existing Matrix Cable System, which links Singapore and Indonesia. The cable would also have a branch to Onslow in Northwest Australia. Even with strong interest in adding a new cable connecting the west coast of Australia to Southeast Asia, there is likely not enough demand to support more than one new system on the route. On the east coast of Australia, there are two current projects: APX-East and Hawaiki. APX- East hopes to be in service in Q3 2016, while Hawaiki is targeting Q Both projects aim to connect Sydney, Auckland, Hawaii, and the west coast of the United States. Hawaiki also plans to install several branching units to enable future connections to various South Pacific islands. In addition to APX-East and Hawaiki s plans to connect Australia and New Zealand across the Tasman sea, one other project is focused purely on the trans-tasman route. The Tasman Global Access (TGA) cable would connect Sydney and Auckland. Funded by Telecom New Zealand, Telstra, and Vodafone, the cable is expected to enter service in The prospects 3

4 for the TGA cable going forward appear positive since all three owners have significant capacity needs on their own, decreasing the need for outside capacity sales to help fund the system. Beyond these international systems, there are two planned cables that would provide intra- Australia connectivity. The Nextgen Darwin-Port Hedland plans to connect the two named cities over a 2,000 kilometer span. The cable will connect several offshore natural gas projects in addition to providing a new cable path. The cable is expected to enter service in The second, APX-Central, aims to connect Perth and Sydney via a 4,800 kilometer submarine path. The cable also has optional spurs to Adalaide and Melbourne on the south coast of Australia. The cable is expected to enter service in Q Numerous projects have connected several South Pacific islands, which were previously reliant solely on satellites for international communications. The most recent cables to enter service were the Tonga Cable in August 2013 and Interchange Cable Network-1 in January Other new systems are planned in this region. The Solomons Oceanic Cable Network is slated for Q2 2016, and will connect the Solomon Islands to a branching unit on the existing Pipe Pacific Cable-1 system. Palau Telecoms is working on a Palau-Guam cable that could be in service in Finally, Interchange is planning a Interchange Cable Network-2 system that would link Vanuatu to Papua New Guinea and the Solomon Islands in Prices in these markets, however, remain amongst the most expensive globally with, STM-1 circuits connecting the islands can cost over $75,000 per month. Pricing Trends While Australia remains one of the most expensive markets in the Pacific, the influx of capacity resulting from recent network upgrades and competition from resellers have sustained rapid price erosion, bringing the country closer to other trans-pacific routes. Upgrades to 100 Gbps technology on PC-1, Southern Cross, and Endeavour have led to lower costs for incremental capacity, driving down wavelength prices across the Pacific. Median 10 Gbps lease prices between Los Angeles and Sydney fell 29 percent between Q and Q and 30 percent annually since Q (see Figure: Median 10 Gbps Wavelength Prices on Los Angeles-Sydney, Q Q4 2014). In Q4 2014, the median monthly lease price on the core Australian route was $85,000 per month, with individual carrier prices ranging from $115,000 to $60,000 per month. The median is now approximately 5 times the price of the key Los Angeles-Tokyo route, compared to a 6 time premium in

5 FIGURE 3 Median 10 Gbps Wavelength Prices on Los Angeles-Sydney, Q Q Notes: Each line represents the median monthly lease price for an unprotected 10 Gbps wavelength on the listed route. Prices are in USD exclude local access and installation fees. Source: TeleGeography Pricing on systems to Asia experienced similar price reductions, but remain expensive compared to other routes in Oceania. In Q4 2014, median 10 Gbps wavelength prices on Sydney-Tokyo and Singapore-Sydney were between $50,000 and $70,000 per month. Median STM-4 prices on the two routes were $28,041 and $32,111 per month after decreasing 21 and 13 percent annually since Q The premium associated with connections to Asia reflects the relative lack of capacity and system upgrades in the region. Until proposed cable projects, including APX-West and the Australia-Singapore Cable are built, or upgrades to existing systems are announced, prices should remain fairly stable. Variations in pricing on routes to the U.S. and Asia from Australia can reflect providers differing regional strengths, customer segments served, protection schemes, and cable routing. Prices between Australia and the U.S. via Japan are approximately 15 percent less expensive than the direct route across the Pacific due to the higher latency associated with this diverse path to the U.S. Similarly, direct connections between Perth and Singapore can be 30 percent more expensive than routes via Guam due to capacity constraints, highlighting the need for additional capacity on the route. Bandwidth requirements between Australia and New Zealand have increased significantly over the past few years, fostering new network initiatives and lowering the cost of capacity on the trans-tasman route. In Q4 2014, median 10 Gbps wavelength prices between Auckland and Sydney were $45,000 per month. The completion of the Tasman Global Access 5

6 (TGA) cable in 2015 and resulting increase in supply and competition will fuel steep price reductions on the route over the next year. Outlook With bandwidth demand to Australia continuing to grow, upgrades to submarine cable systems have increased available capacity, enabling resellers and accelerating price erosion throughout the region. With new systems proposed on both the east and west coasts of the country, price reductions on circuits to the U.S. and New Zealand should continue into Until upgrades to current networks or construction of proposed systems between Australia and Asia are undertaken, however, price declines for capacity to Asia will be modest. Price Watch TeleGeography s Price Watch service allows market participants to track recent pricing developments at a glance. Price Watch tracks pricing changes in six different regional scenarios that are each updated on a semi-annual basis. Because pricing in some regions, particularly on terrestrial routes, is distance-sensitive, prices are stated both in absolute terms and in dollars per Mbps per mile. Price Watch information is drawn from TeleGeography s Bandwidth Pricing Database Service. The online database provides access to capacity prices on over 180 separate routes and capacities between 2 Mbps and 100 Gbps. Monthly lease figures are an average of the median price over the previous three months. FIGURE 4 January 2014 (USD) Route E-1 (2 DS-3 (45 STM-1 (155 E-1 (2 DS-3 (45 STM-1 (155 Africa-Asia Johannesburg Singapore $2,679 $13,125 $26,250 $0.249 $0.054 $0.032 Africa-Europe Abidijan London $3,078 $13,233 $27,790 $0.482 $0.092 $0.056 Johannesburg London $1,630 $7,500 $15,000 $0.145 $0.030 $0.059 Lagos London $2,914 $13,404 $28,350 $0.467 $0.096 $0.063 Europe-Middle East Dubai London * $1,173 $5,750 $11,500 $0.099 $0.022 $0.012 Jeddah London * $591 $2,894 $5,787 $0.100 $0.022 $0.013 Marseilles Fujairah * * $518 $2,537 $5,074 $0.083 $0.018 $0.011 London-Mumbai $969 $4,750 $9,500 $0.097 $0.021 $0.012 Notes: * = City center to landing station, * * = Landing station to landing station Source: TeleGeography Research 6

7 FIGURE 5 January 2015 (USD) Route E-1 (2 DS-3 (45 STM-1 (155 E-1 (2 DS-3 (45 STM-1 (155 Africa-Asia Johannesburg Singapore $2,679 $12,000 $25,667 $0.249 $0.050 $0.031 Africa-Europe Abidijan London $1,531 $7,500 $15,000 $0.240 $0.052 $0.030 Johannesburg London $1,041 $5,100 $9,000 $0.092 $0.020 $0.056 Lagos London $1,224 $6,000 $14,000 $0.196 $0.043 $0.074 Europe-Middle East Dubai London * $907 $4,445 $8,890 $0.134 $0.029 $0.017 Jeddah London * $347 $1,700 $3,400 $0.059 $0.013 $0.007 Marseilles Fujairah * * $459 $2,250 $4,500 $0.074 $0.016 $0.009 London-Mumbai $900 $4,100 $9,000 $0.090 $0.018 $0.012 Notes: * = City center to landing station, * * = Landing station to landing station Source: TeleGeography Research Pricing Team Contact Information Washington, DC Office, 1909 K Street, NW Suite 380 Washington, DC USA For further information, please contact: Rob Schult [email protected]. Erik Kreifeldt [email protected], Greg Bryan [email protected], Brianna Boudreau [email protected], Michael Bisaha [email protected], Janice Shon 7

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9 The content on the preceding pages is a section from TeleGeography's Bandwidth Pricing Report The work is based on sources believed to be reliable, but the publisher does not warrant the accuracy or completeness of any information for any purpose and is not responsible for any errors or omissions. This work is for the confidential use of subscribers. Neither the whole nor any part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded or otherwise, without prior written consent from PriMetrica, Inc. All rights reserved. TeleGeography A Division of PriMetrica, Inc. Washington, D.C. / San Diego / Exeter U.S. tel: / U.K. tel: