10G wavelength prices continue to drop, says TeleGeography

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As businesses and wholesale carrier customers migrate away from lower-capacity SDH/SONET services to optical wavelengths, wavelength service prices are dropping fast while lower-capacity circuit prices are moderating.

Between Q4 2011 and Q4 2012, a TeleGeography report said, the median monthly lease prices for 10 Gbps wavelengths and 155 Mbps STM-1/OC-3 circuits declined significantly on major global routes. The prices for 10 Gbps circuits fell 37 percent, while prices of 155 Mbps STM-1/OC-3 circuits declined 12 percent.

But as seen with the prices of Ethernet Virtual Private LAN Service (VPLS) services, for example, 10G and SDH/SONET service pricing varies by region.

Telegeography wavelength pricing 2013

10 Gbps wavelength vs. STM-1/OC-3 price declines. (Source: TeleGeography)

To purchase a connection between Hong Kong and Tokyo or from Hong Kong to Los Angeles, the monthly lease price of a 10 Gbps circuit declined at a yearly rate of 32 percent between Q4 2009 and Q4 2012, to $23,250 and $43,800. However, the monthly price of an STM-1 circuit on these routes declined by only by 1 and 21 percent to $6,948 and $6,400 per month.

Although the prices for intra-European and trans-Atlantic circuits are lower, they illustrate similar trends. The median monthly 10 Gbps wavelength prices between London and New York declined at a CAGR of 13 percent to $9,000, while STM-1 prices declined just 2 percent annually, to $2,816. However, the monthly price of a 10 Gbps link between Frankfurt and London declined 26 percent annually, to $3,500 a month, and STM-1 prices fell 10 percent to $1,540.

"As carrier demand for bandwidth continues to shift toward higher capacities, 10 Gbps wavelengths will remain the common denominator of the global wholesale market," said TeleGeography analyst Brianna Boudreau. "While 10 Gbps price declines will outpace those of smaller SDH circuits for some time, 40 Gbps and 100 Gbps wavelengths are becoming more widely available."

A growing base of providers, including AT&T (NYSE: T), BT (NYSE: BT), Orange, and Verizon (NYSE: VZ) have been increasing their expansion of VPLS services in both the United States and various countries.

The market will be driven by the increased demand for higher capacity to support the ongoing need for the growth of video services delivered by both telcos and a growing base of over-the-top providers like Netflix (Nasdaq: NFLX).

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