Dedicated T-3 prices drop dramatically

By Denise Pappalardo
Network World, 06/26/00

Those customers looking for bargains on dedicated Internet access are most likely to find the best deals on the high end of the bandwidth spectrum.

In some cases, the cost of dedicated T-3 (45M bit/sec) Internet access services are down more than 25% over the past six months. Part of the price drop is attributed to ISPs deploying faster network gear that can support up to OC-192 speeds, says Steven Harris, an analyst with market research firm IDC in Framingham, Mass. Increased bandwidth demand is also a contributing factor, he says.

Lower prices will play a large part in customers' decisions to move to a T-3 line instead of adding more T-1 (1.544M bit/sec) lines.

"Not two years ago, dedicated T-3 connections were $45,000 per month," says Jim Slabey, senior analyst at Giga Information Group, a Cambridge, Mass., consulting firm. Today, customers will pay at least $10,000 per month less.

UUNET currently has the highest monthly T-3 rate at $35,000, but the ISP says it will introduce new rates next month.

In February, AT&T carved about one-third off of its T-3 offering, dropping from $35,000 to $26,000 per month. However, AT&T has the highest T-1 rate at $1,850 per month. Like most ISPs, AT&T offers additional discounts for long-term deals - for example, 10% on two-year and 15% on three-year contracts.

The least expensive deal comes from Concentric Network. While other ISPs negotiate local loop port access for customers, Concentric is the only ISP that includes local loop access fees with its standard T-1 dedicated service rates. Concentric's T-1 customers have to be within a 50-mile radius of one of its 37 SuperPOPs to get the local loop fees included in the base price of $1,395 per month.

Concentric, like most other ISPs, also offers customers a fractional T-3 dedicated Internet access service that gives users the option of signing up for more bandwidth, but not committing to a full T-3. Concentric is running a special on its FlexChannel T-3 service with discounts starting at 15% off list pricing, says Alan Bavosa, manager of enterprise access services at Concentric.

The promotional rate for FlexChannel T-3 service with 3M bit/sec is $3,000 per month, for example.

Cable & Wireless and UUNET offer similar fractional T-3 services that cost $4,465 and $6,000 per month respectively. Cable & Wireless also offers a new NxT1 service that lets customers bundle multiple T-1 lines to increase bandwidth without switching to a T-3.

Even though T-3 prices are coming down, a full T-3 at 45M bit/sec may be overkill for some. If users expect their bandwidth needs to increase significantly over the next few years, choosing a fractional T-3 service may make more sense.

Here are other factors to consider when considering the leap to T-3:

Monthly port charges for T-1 local loop access typically average about $200 per month, while T-3 local loop access averages about $2,500 per month.

T-3 services are initially more expensive than bundled T-1 services because the port charge is up to $2,000 more per month per line. But it's important to keep in mind that in the case of an NxT1 service customer who has seven T-1 lines, that customer will pay $1,400 per month in local loop access port charges alone.

Bundled T-1 services are better for companies that don't expect their bandwidth needs to exceed 10M bit/sec to 15M bit/sec in the next few years. The prime reason for this is most NxT1 services only let business users bundle seven to 10 T-1 connections, or 10.8M bit/sec to 15.4M bit/sec. If your company's needs will exceed 20M bit/sec in the next two to three years, you might be better off with a fractional T-3 service.

But not everyone will even have that option.

"In some regions there are problems getting T-3 lines regardless of what Qwest [Communications] and Level 3 say they've installed," Concentric's Bavosa says. As might be expected, smaller cities and rural areas face the biggest problems.

The cost of getting a T-1 or T-3 dedicated line installed varies greatly between ISPs. For example, Cable & Wireless and PSINet charge $300 and $700 respectively to install a T-3, while AT&T and Sprint charge up to $5,000 and $6,000 respectively.

Giga's Slabey says many service providers actually use those fees as bargaining tools.

"ISPs throw installation charges out the window the same way car salesmen throw in the mats if they're worried you may walk away from the table," he says.