The ongoing desire of enterprises to purchase MPLS IP VPN services is driving down service prices as more service providers compete to meet this demand, according to a new TeleGeography report.
Sales of ports at speeds below T-1/E-1 (1.5 Mbps) declined sharply between the first quarter of 2013 and the first quarter of 2014 and now only make up for just 8 percent of global IP VPN sales. Meanwhile, sales of 2-10 Mbps ports jumped and now account for 51 percent of MPLS VPN ports sold.
Service providers are now implementing price reductions for the higher speed services. During the same period of the first quarter of 2013 to the first quarter of 2014, the median price for a 10 Mbps port declined at an average of 18 percent in the world's major cities.
In the U.S. and Europe, port capacities from 2 Mbps to 10 Mbps only comprise over half of IP VPN sales, but demand for larger ports is increasing, with 50Mbps to 100 Mbps ports now accounting for 12 percent of sales in both regions. Due to the demand for these higher capacities, TeleGeography said that 100 Mbps Fast Ethernet prices "have fallen far more rapidly than those of 10 Mbps ports."
The median price in New York for a 10 Mbps circuit declined 9 percent, to $608, while FastE prices dropped 34 percent, to $2,073. In London, median 10 Mbps prices declined 6 percent, to $592 per month, while FastE prices fell 20 percent, to $2,753 per month.
"IP VPN port prices reflect both the level of competition in, and the relative cost of international bandwidth to, a city," said TeleGeography analyst Brianna Boudreau. "As end-user capacity requirements increase and the underlying cost of transport decreases, carriers will continue to adjust prices. Further price erosion for IP VPNservices, particularly at higher capacities, can be expected."
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