Transit-ion

Increasing use of Ethernet ports by ISPs will help triple the combined transit revenue of the U.S., European and Asia/Pacific Rim markets between 2002 and 2007, according to Probe Research.

Transit customers will increasingly migrate to Ethernet-based ports, particularly where the backbone providers and local ISPs are co-located together, Probe suggests. Probe says many service providers find that Ethernet-based ports are 20% to 30% cheaper than the equivalent SDH ports, and are more plentiful on router and switch line cards.

Thus, Ethernet-based services can potentially be turned up faster than SDH-based services.

Another trend that will drive transit revenue is in multihoming, which Probe expects to decrease over the next two to three years. Currently, the majority of companies are purchasing Internet transit services from, on average, three transit service providers (TSP).

However, with the number of transit providers expected to decline over the next few years and a level of stability returning to the market, this is likely to lead to a reduction in revenue-earning opportunities for TSPs, Probe proclaims.

Transit service revenue is also affected by the cost of bandwidth and the ability to pick up distressed assets inexpensively, Probe states. In the current climate of falling prices and limited capital expenditure, ISPs now have more choices in terms of whom they can cost effectively exchange traffic with or purchase transit and/or peering services from.

As a result, some large regional or national ISPs have shifted away from using transit exclusively and toward using either a mixture of transit and peering, or even peering exclusively. In the majority of cases, ISPs manage a mix of these relationships; but if the drift away from transit continues, Tier-1 ISPs will have to find other ways of attracting and retaining customers, Probe believes.