No price war by cash-strapped carriers

The telecommunications market may be near rock bottom, concludes market research firm TeleGeography. There is little network construction and some consolidation is underway, says the firm in its recently released “International Bandwidth 2003 Submarine and Terrestrial Network” report.

The research offers a detailed analysis of bandwidth availability and service rates around the world.

The report says that although there are more carriers today that are financially strapped and in bankruptcy, “there is no evidence of price wars.” In fact, TeleGeography says that carriers that are in financial trouble or have recently emerged from bankruptcy are actually offering some of the highest rates. TeleGeography analyzed 30 terrestrial network services providers in the report.

The report also points to the fact that long-haul circuits have dropped dramatically over the last three years by 80% to 90%. While TeleGeography examines wholesale rates that carriers charge other carriers, its findings speak for the telecom industry overall.

Service rates for an OC-3, 155M bit/sec link between New York and Los Angeles have been on a sharp decline since 2000. The average annual cost for such a connection in 2000 was $1.8 million. In 2001 the same link cost 67% less at $597,000, and in 2002 the cost was 58% less at $248,100.

But carriers seem to be pulling in the reigns on price declines this year. Today, an OC-3 between New York and Los Angeles costs $226,500. Although this is 9% less than in 2002 it is clear that rates are not dropping nearly as dramatically as they did in previous years.

TeleGeography’s report also examines the number of service provider competitors in each market. Users in New York still have the most service providers to choose from. The report says there are 27 long-haul carriers in the Empire State. There are 26 providers in Atlanta, 25 in Chicago and 23 each in Los Angeles and Washington, D.C.

Some larger markets such as Austin, San Francisco and San Jose only have 15 service providers to choose from.

For more info on Telegeography’s report checkout https://www.telegeography.com/pubs/networks/reports/ib/index.html