Thursday, July 9, 2015

IP Transit Market Shrinking

More Internet domain peering deals means a smaller market for IP transit services.
According to TeleGeography’s IP Transit Forecast Service, global IP transit revenues will fall six percent annually between 2014 and 2021.

That will reduce the size of the market from $4.9 billion to $3.2 billion.

IP Transit Market Forecast
IP Transit Forecast Service
source: TeleGeography

As often is the case, trends vary by region, and the biggest shifts will occur in emerging nations and regions.

While revenues in more developed markets will remain relatively static over the next seven years, those in developing regions will fall significantly.

IP transit revenues in North America will increase one percent annually, while IP transit revenues in  Europe will fall by one percent per year.

In contrast, revenues in Africa will fall nine percent, while revenues in the Middle East will decline 11 percent a year.

Although overall Internet traffic is growing fastest in emerging markets, Internet service providers in these areas are migrating from purchasing transit to establishing mostly free peering arrangements more quickly than those in Europe and North America, where peering is already common, TeleGeography argues.

TeleGeography forecasts that the share of African Internet traffic exchanged using IP transit will fall from 84 percent in 2015 to 62 percent by 2021.

IP Transit Revenue Change by Region, 2014-2021 revenue_change.png

Source: TeleGeography

Infrastructure costs also play a role. IP transit is much cheaper in the more developed markets of North America and Europe, and it often makes economic sense for ISPs in these regions to pay for transit rather than incur the cost of building infrastructure required to peer.

The share of U.S. Internet traffic exchanged using IP transit is expected to fall only moderately over the longer term, from 44 percent in 2015 to 39 percent in 2021.

Price declines also play a role. Developing countries will see steeper price reductions than more mature markets.

The monthly price per megatbit per second  for a 10 gigabit per second Ethernet (10 GigE) port in Africa, Latin America, and the Middle East is projected to fall between 27 and 29 percent compounded annually through 2021, while declines in North America and Europe will be more modest, at 20 percent compounded annually.

Transit and Peering Growth

IP Transit Forecast Service

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