Sub-10 Mbps VPN connections still in high demand, says TeleGeography

Service providers may be widening their portfolio of high bandwidth IP VPN ports, but the reality is that most customers still want sub 10 Mbps connections.

New data from TeleGeography's Enterprise Network Pricing Service says that 88 percent of the ports sold by service providers between Q1 2011 and Q1 2012 were 10 Mbps or below.

In established markets such as North America, Europe, and Asia, 54 percent of the ports sold were 2 Mbps, while 34 percent were between 2-10 Mbps.

Alternatively, in emerging markets like Latin America, 91 percent of port sales were 10 Mbps and below. Out of that figure, 48 percent were using less than 2 Mbps and 43 percent were using between 2-10 Mbps.

The demand for lower port speeds in the Middle East and African markets, two that have the highest prices for business circuits, 80 percent of port sales were for less than 2 Mbps speed ports.  

Rob Schult, TeleGeography research director, said that the high demand for lower speed ports reflects the fact that large businesses don't need a high speed connection for every site.    

"IP VPN solutions are typically implemented by customers with modest bandwidth requirements that need a managed solution between geographically dispersed work sites," Schult said. "In contrast, high capacity ports are typically employed at network hub sites. Even though carriers are increasing their higher capacity offerings, we expect the majority of customer demand to continue to be for the lower-priced and lower capacity connections that are well suited for the needs of most of their sites."

Regardless of the need for lower bandwidth speeds to access VPNs, the service continues to be a growing part of all of the major service provider's business service revenue. All of the major service providers, including AT&T (NYSE: T), BT (NYSE: BT), Level 3 (NYSE: LVLT), Verizon (NYSE: VZ) and tw telecom (Nasdaq: TWTC), reported strong gains in IP VPN sales to their respective business customer base throughout Q4 2011.

Telegeography IP VPN 2012

For more:
- TeleGeography has this report

Special report: Wireline in the fourth quarter 2011

Related articles:
TeleGeography: Partnerships key to scaling international VPN coverage
BT adds Ethernet nodes in U.S. and Canada
AT&T takes leadership spot on Gartner's APAC service provider quadrant
tw telecom Q4 2011 revenue rises on strong Ethernet, IP service sales

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