IP Transit Prices Continue To Fall

An interesting parameter in the Internet world is how much a carrier has to pay to send a certain amount of data to another part of the Internet. The currency for that is peak bandwidth requirement, i.e. the peak MBit/s going through an interface (at the 95% percentile). So if a carrier has 20 GBit/s a second that goes to or from him it's going to cost him 20 * 1000 = 20.000 MBit/s. According to Telegeography, the current price per MBit/s is around 4 Euros in London and New York, down from over 4 times that price only 4 years ago. So for the 20 GBit/s peak, the carrier has to pay 20.000 * 4 Euros = 80.000 Euros a month. Sounds a lot, but 20 GBit/s is also not a negligible number.

How many DSL lines might that be? Obviously, you can't device the 20 GBit/s through the average MBit/s a DSL line offers as most of the time, the link is unused and there is some sort of statistical multiplexing between the users of a network. Also, most mobile TV offers terminate in the network operator's network, so that traffic doesn't go over an IP transit line. A couple of years ago, the over-subscription rate between the line rate and the backhaul from the DSL access multiplexer was said to be in the order of 1:50. Perhaps its a bit more today with all those Youtube videos, so let's say it's 1:25 Assuming DSL lines with an average speed of 8 MBit/s (which includes much slower and much faster connections) each line, 20 GBit/s would be enough to support (20.000 MBit/s % 8 MBit/s) * 25 = 62.500 lines. Dividing the 80.000 euros a month for the IP transit by the 62.500 lines results in about 1.30 euros per line per month for the transit.

The numbers in the second paragraph are all assumptions. If you agree or disagree with the numbers and have references for one or the other parameters, please consider leaving a comment, I'd be quite interested.

Obviously, the IP transit costs per line as calculated here is only one part of the overall costs a network operator has for its DSL networks. All the cables, the DSLAMs, central offices and the capital and operations expenditure for that are the other part and have nothing to do with the IP transit costs.

3 thoughts on “IP Transit Prices Continue To Fall”

  1. An ISP that would have 20 Gbit/s of transit (not access) bandwidth would likely have some sort of content caching setup with Youtube. Also, large content providers are generally peering a lot.

    So I’m guessing to get 20 Gbit/s transit traffic, the amount of access traffic => number of subscribers needs to be substantially higher still.

    Amount of peering depends on the area of course. Peering would probably be more common in Europe than US, for example.

  2. 1. I agree with Zed: prices are at or below $1 especially at these volumes. By the end of 2012 we will be at 70 – 60 cents

    2. You peer at least 80% of your traffic away at about 15/ 20 cents per mb and have 20% at $1 giving average cost of 32 cents.

    Conclusion: IP Transit cost is no longer the issue

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