GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

Executive Summary
TeleGeographys Global Internet Geography Research Service provides analysis and
statistics on Internet capacity and traffic, IP transit pricing, and backbone operators.
International Internet bandwidth and traffic growth has gradually slowed in recent years,
but remains brisk, increasing at a compound annual rate of more than 33 percent between
2012 and 2016. IP transit price declines are mitigating in major hubs, but significant regional
differences in prices persist around the world

Internet Traffic and Capacity

International Internet capacity growth has fallen steadily for many years, and annual growth
rates have lately settled in the low-30 percent range (see Figure: International Internet
Bandwidth Growth, 20122016). But even with the declining pace of growth, 163 Tbps of
new international Internet capacity was deployed between 2012 and 2016, bringing global
international Internet capacity to 241 Tbps.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

FIGURE 1

International Internet Bandwidth Growth, 20122016

Notes: Data represent Internet bandwidth connected across international borders as of mid-year. Domestic
routes are excluded.
Source: TeleGeography

2016 PriMetrica, Inc.

Of the 241 Tbps of international Internet capacity, 79 Tbps was inter-regional, while 162
Tbps connected countries within each of the major world regions. Since TeleGeography
began tracking international Internet capacity in 1999, the highest-capacity inter-regional
route had always been Europe-United States & Canada. This changed in 2013 as capacity on
the Latin America-U.S. & Canada route exceeded the Europe-U.S. & Canada route. In 2016,
the Latin America-U.S. & Canada route extended its lead, expanding 33 percent to reach 23.4
Tbps (see Figure: Inter-regional Internet Bandwidth, 2016). This shift may seem surprising
but Latin Americas international Internet bandwidth is almost completely connected to the
U.S. & Canada, whereas Asia and Europe have their inter-regional capacity spread among
other routes, not to mention considerable levels of intra-regional capacity these regions
use. In addition, the considerable deployment of private network capacity by large content
providers across the Atlantic and Pacific appears to have dampened the growth of Internet
capacity on these routes.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

FIGURE 2

Inter-Regional Internet Bandwidth, 2016

Notes: Data as of mid-2016.

Source: TeleGeography

2016 PriMetrica, Inc.

International Internet traffic growth largely mirrors that of Internet capacity; however, traffic
and capacity growth seldom move in perfect tandem. In the past five years, peak utilization
rates have fluctuated within a fairly narrow band (see Figure: Peak Utilization by Region,
20122016). While some operators contend that skyrocketing traffic volumes will overwhelm
networks, this situation has not proven to be true on international links. Investment in new
capacity has led to remarkably stable levels of utilization on international Internet backbones.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

FIGURE 3

Peak Utilization by Region, 20122016

Notes: Data reflect utilization of Internet bandwidth connected across international borders including links
between countries in each region. Data as of mid-year.
Source: TeleGeography

2016 PriMetrica, Inc.

Prices
Global IP transit price declines continued to decline at a steady clip in 2016, aligning with the
longer-term trend. Median 10 GigE prices in London, New York, So Paulo, and Singapore
fell an average of 24 percent between Q2 2015 and Q2 2016 and 21 percent compounded
annually since Q2 2013. Among these key cities, price reductions were most significant in
So Paulo and Singapore with 10 GigE medians dropping 33 and 23 percent compounded
annually since 2013. In well-established Internet hubs such as London and New York, price
erosion was more modest, with prices declining 13 and 16 percent compounded annually
since 2013.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

FIGURE 4

Median 10 Gbps IP Transit & Wavelength Prices on Major

International Routes, Q2 2016

Notes: Each line represents the median monthly lease price for an unprotected 10 Gbps wavelength on an
individual route. Each circle represents the median monthly $ Per Mbps price for a 10 GigE IP transit port
in the listed city. Routes and cities are shaded corresponding to price, from least expensive in blue to most
expensive in red. Prices are in USD and exclude local access and installation fees. 10 Gbps & 10 GigE =
10,000 Mbps.
Source: TeleGeography

2016 PriMetrica, Inc.

While prices have declined globally, significant geographic differences persist. Prices are
lowest in Europe and the U.S., which serve as critical international traffic hubs (see Figure:
Median 10 Mbps IP Transit & Wavelength Prices on Major International Routes, Q2 2016).
Transit is more expensive in regions that remain largely dependent on long-haul links to
Europe or the U.S. to gain access to international connectivity and where service providers
incur the additional cost of transport, pricing local transit accordingly. For example, median
10 GigE prices in So Paulo, where internet traffic is ultimately exchanged locally in Miami,
remain six times the price of a comparable port in the U.S. Similarly, median 10 GigE prices
in Sydney are ten time the price of Los Angeles. In Singapore, which has recently become
integral to regional traffic exchange within Asia, prices are now just 3 times those in Europe
or the U.S, compared to 5 times in previous years.
IP transit service can be even more expensive in remote locations with limited bandwidth
supply and meager competition, such as sub-Saharan Africa and remote island nations.
Where STM-1 transactions predominate, prices often reach $75 per Mbps per month. Where

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

capacity is available in 10 Gbps increments, few cities remain where transit prices exceed
$25 per Mbps per month. On the opposite end of the spectrum, carriers report extraordinary
deals with favored buyers as low as 10 cents per Mbps per month.

Provider Connectivity
TeleGeographys rankings of provider connectivity includes analysis based on BGP routing
tables, which govern how packets are delivered to their destinations across myriad networks
as defined by autonomous system numbers (ASNs).
Every network operator relies, to some extent, on others to reach parts of the Internet not
served by themselves. Although there is no such thing as a ubiquitous Internet backbone
provider, Level 3s network comes closest. Level 3 had the largest number of connections,
and largest share of IP addresses from neighboring networks, of any provider. In addition
to examining overall connectivity, TeleGeography specifically compared upstream provider
connections to downstream broadband ISPs. To give a better indication of which providers
connect to the largest number of eyeballs, we weighted those connections by the number
of downstream broadband ISPs subscribers. Most of the carriers that ranked highly in terms
of connecting downstream ASNs of all forms also ranked highly in terms of connecting
downstream broadband ISPs. For example, Level 3 ranked as the top provider to all
downstream ASNs and second best to the broadband ISP segment. However, differences
between the sets of customers abound. In 2016, Tata emerged as the largest upstream
provider to broadband ISPs, yet Tata ranked only fourth largest in the world among
downstream ASNs of all types. A common finding in many countries is that the incumbent
carrier has a strong overall reach (thanks in part to its own broadband subscriber base and
in part to its entrenched position as primary ISP to local enterprises), yet holds only a small
upstream share of competing broadband ISPs connectivity. For example, Swisscom had an
overall 60 percent reach to IP addresses in Switzerland, but had only a 0.2 percent share of
IP addresses from other Swiss broadband ISPs.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

FIGURE 5

Number of Enterprise versus ISP Customers

Notes: Enterprise customers exclude downstream connections from companies from the ISP/carrier and
hosting/CDN/content/cloud services sectors.
Source: TeleGeography

2016 PriMetrica, Inc.

TeleGeography also analyzed which upstream ISPs provide service to Fortune 500
companies, and to enterprises grouped by industry vertical (e.g., the financial or medical
sectors). Traditional measures of upstream ISP connectivity often serve as poor predictors
of which ISPs have a strong presence in the enterprise market. The figure (Number of
Enterprise versus ISP Customers) illustrates this finding. AT&T and CenturyLink lag behind
several other Internet providers in terms of ISP customers connected, yet both carriers had
a large number of enterprise customers. Conversely, Hurricane Electric and Cogent had
proportionately fewer enterprise customers but played a strong role of backbone provider to
other ISPs. In past years, Level 3 straddled the line between Stronger Enterprise Focus and
Stronger Wholesale Focus, but its 2014 acquisition of tw telecom and its many enterprise
customers has pushed Level 3 firmly into the enterprise focus side of the chart.

Outlook
The combined effects of new Internet-enabled devices, growing broadband penetration in
developing markets, higher broadband access rates, and bandwidth-intensive applications
will continue to fuel strong Internet traffic growth. While end-user traffic requirements will
continue to rise, not all of this demand will translate directly into the need for new longhaul capacity. Aggregate international capacity and traffic growth rates are slowing as the
global Internet matures. Outside of some developing countries, the days of triple digit annual
growth rates are long gone. A variety of factors shape how the global Internet will develop
in coming years.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

Transport Costs
IP backbone operators must make considerable investments in network capacity to keep up
with rapid traffic growth, driving concerns that capacity costs will outstrip traffic revenues.
As IP transit prices have eroded, the convention of expressing transactions as unit price per
Mbps yields conspicuously low figures, which contributes to a sentiment that the transit price
trajectory is unsustainably cheap. But as aggregate volumes increase and prices fall, a parallel
effect takes place on network cost. High-capacity ports afford lower unit traffic costs than
low-capacity ports.
Technological and economic advancements in transport infrastructure have lowered capacity
costs for IP traffic. For example, 100 Gbps transmission can transport traffic at a lower cost
per bit than 10 Gbps. Although 100 GigE ports pose higher cost and traffic topology hurdles
at layer 3 than at the transport layer, the industry will eventually overcome these barriers,
yielding continued reduction in cost per bit and greater efficiency in network architecture.

Persistent Price Erosion

It is not a bold prediction that IP transit prices will continue to fall globally, as they always
have. The rate of decline will be greatest in emerging markets with high prices that have
greater potential to fall due to increases in volume and local traffic exchange that improve
economy of scale. Prices will also fall in the established hubs of internet traffic exchange,
enabled by escalating volume and declining unit cost. Although 10 Gbps price declines are
mitigating in major hubs, the shift to 100 Gbps ports will usher in another step in aggregate
unit price decline.

The Private Network Effect

Content providers and cloud providers are expanding their deployments of private network
capacity rather than relying heavily on IP backbone operators. The rapid growth of capacity
for data replication and mirroring among data centers are key reasons for the rapid growth of
private network capacity. As a result, the rise of private network capacity is having a major
impact on the growth of Internet capacity requirements on some routes, particularly the transAtlantic and trans-Pacific. The increased use of private network capacity seems likely to slow
the need for new Internet capacity by IP backbone operators.

Content Delivery Networks and Caching

The increased reliance on content delivery networks and caching technologies will continue
to have a localizing effect on traffic patterns and dampen international Internet traffic growth.
As demand for content and applications grows in new locations, CDN nodes and caches will
be deployed into these areas. While the increase in broadband users and access rates will
continue to drive traffic growth in access networks, much of this growth may be managed
locally within a network and may not lead to proportional increases in traffic on international
links. As a result, some of the most popular video services, such as Netflix, have virtually no
impact on international Internet traffic. Increased localization of traffic is likely to continue,
given the dominance of video traffic.

GLOBAL INTERNET GEOGRAPHY EXECUTIVE SUMMARY

The content on the preceding pages is a section from TeleGeography's Global Internet Geography
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.
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All rights reserved. 2016 PriMetrica, Inc.
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