Average Capacity Prices Dropped 10 to 20% in 2007

The average price of wholesale circuits in most major markets dipped 10 to 20 percent in 2007, according to TeleGeography. For many, that would be considered price stability.

As price declines have moderated, international bandwidth demand has remained strong, growing at a compounded annual rate of 52 percent over the past five years, TeleGeography adds.

But revenue growth remains elusive for many wholesale network operators, the company says. A key reason lies in bandwidth buyers' changing purchase patterns: they simply are substituting bigger pipes for smaller pipes, paying more money in aggregate but at lower prices per megabit per second of capacity.

Companies that may have purchased a few 155 Mbps STM-1/OC-3 circuits five years ago are now opting for 2.5 Gbps or 10 Gbps wavelengths. These large circuits are far cheaper in terms of the price per Mbps of capacity than the smaller circuits.

"The effective price per megabit per second of capacity sold is falling a lot faster than nominal circuit prices, themselves," says TeleGeography Research Director Robert Schult. "Carriers need to sell ever larger volumes just to maintain stable revenues."