John Linton
When I returned from holidays at the end of July 2007 I commented on the various statements being made about the cost of IP bandwidth "no longer falling" as justifications for some ISPs increasing the costs of plan prices. At the time I made the observation that the only aspect of IP bandwidth costing that I had seen was a continuation of the progressive decline which, as far as I could see at the time I made the comments, was likely to continue.
As it's the time of year that Exetel start to plan what we'll do with our 2 year and 1 year contracts for IP we have begun to get the responses from those companies with whom we currently deal and other companies that we consider as possible future suppliers. I see nothing in the responses we have received to date to indicate anything other than the likelihood that IP bandwidth prices will be much lower in 2008 than they were in 2006 when we entered in to our current contracts or what we pay today - the likely 20% + per year decline seems to be as expected.
As Exetel is still basically in the 'start up' phases of its operations we have never seriously considered buying directly from the cable owners though we do get pricing each year. Currently we use a little more than 1.5 gbps of IP connectivity which is beginning to reach the volume where we could consider using a direct access to one of the major Australia-USA cable owners so we have been a little more interested in examining those options than we have in the past three annual reviews. I was therefore surprised to see the initial responses from the cable owners this time which, at first glance, don't seem to be out of the question.
It seems, if our revised plans indicate that we would need around 2.4 mbps in mid 2008 (compared to 1.6 mbps today) then we could buy at around a 50% discount to today's prices from the re-sellers - which will of course fall over the coming 6 - 9 months. What this means though is that providing we can negotiate a contract with the cable providers we could reduce our current IP costs by around 45% from what we pay today - or we could buy almost double the bandwidth that we pay for today at the same price.
I feel very comfortable in now advising our current IP providers that we will not require their services beyond the current contact end date unless they are prepared to reduce their prices substantially - I've little doubt that any one of the four providers we are considering will offer IP at a price of 25 - 30% less than we are currently paying and, depending on many currently unknown factors, we may simply buy direct at a 45% discount to our current prices.
In any event it's clear that IP prices are NOT "static" or "increasing" - they continue to fall and fall slightly faster than they have done over the past two years.
It seems the statements about the price of IP bandwidth made by those ISPs two months ago were, not unexpectedly, completely untrue.