Trans-Pacific capacity prices have plummeted over the past two years, says TeleGeography.Between the second quarter of 2009 and second quarter of 2011, the median monthly lease price for a 10 Gbps wavelength from Los Angeles to Tokyo fell 63 percent, from $98,500 to $36,000.
Prices are tumbling on other trans-Pacific routes as well. Over the past 12 months, median 10 Gbps wavelength prices from Los Angeles to Singapore fell 33 percent, while Hong Kong-Los Angeles 10 Gbps prices declined 39 percent.
Three new cable systems are probably the reason for the sharp price declines. The Asia-America Gateway (2008), Trans-Pacific Express (2009), and Unity (2010) cable systems have increased supply, with the predictable effects on pricing.
Industry executives have been relatively optimistic in public about "rational" pricing behavior in the capacity markets. Some will argue faster price declines are to be expected when new capacity comes online. Generally speaking, price-per-megabit prices drop 20 percent or so each year, so a decline, on a per-megabit basis, is not unusual. The sharper declines on trans-Pacific routes, though, suggest pricing pressure will be more significant than usual, for a while.
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