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  1. #26
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    Quote Originally Posted by funkywizard View Post
    I suppose only time will tell then. Since L3 and GLBX seem to be directly competing on many of the same lower price deals, it should affect some things in some places, but I will still be surprised if the long term price trend reverses without some massive change in the market that nobody is yet aware of, such as war or double digit yearly inflation.
    I agree, I'm not sure this is enough of a change to stop the downward trend of pricing, let alone reverse it. Just trying to indicate this has a lot more (at least as much) to do with the fiber assets in the ground than just competing on straight transit pricing.
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  2. #27
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    Quote Originally Posted by funkywizard View Post
    I suppose only time will tell then. Since L3 and GLBX seem to be directly competing on many of the same lower price deals, it should affect some things in some places, but I will still be surprised if the long term price trend reverses without some massive change in the market that nobody is yet aware of, such as war or double digit yearly inflation.
    You have already seen the price correction with mzima and bandcon getting absorbed by larger "financially stable" providers that have increased rates WVFiber got purchased by host.net and rates got jacked up. Cogent has stopped the crazy deals, etc.

    The overall pricing trend I believe is at the bottom of the curve now and we'll start seeing the market as a whole start to correct and rise, especially with M&As reducing overall competition.

  3. #28
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    Interesting, because GLBX provides quite a bit of transit to HE... this very well could affect HE's bottom line (and pricing) looking forward. Or maybe give them cheap L3 routes (far less likely)...
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  4. #29
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    Who is going to buy up XO? I bet they go next.
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  5. #30
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    Quote Originally Posted by FastServ View Post
    Interesting, because GLBX provides quite a bit of transit to HE... this very well could affect HE's bottom line (and pricing) looking forward. Or maybe give them cheap L3 routes (far less likely)...
    I don't think its going to bother HE, nLayer and related. They buy so much on volume and will probably be off setting paid routes for peering in the future paying a little bit more per Mbps wont effect their bottom line very much. nLayer has a good network and globally is expanding. HE is starting to do the same. More e xpansion and more peers they get the less dependent they are on the tier1's to fill the void.
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  6. #31
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    We don't know how much of GLBX HE uses but they're not forced to keep using it even if GLBX jacked up the price. Other ISP's are in situations where they can move traffic from GLBX to MANY other carriers.

    The glbx client base you might be able to raise prices on and have them respond with "oh well we have no option here" are not other ISP's..

    Or it's an ISP in south america because in south america GLBX is like the only game in town. Other ISP's in US and EU wouldn't have a problem moving traffic when their existing contract is over.

  7. #32
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    I'm pretty happy about this - should expand L3's international presence.

  8. #33
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    It's only a matter of time before bandwidth/internet is just like oil is today. Mark my word. 20 years from now I will be 43 years old, and I bet bandwidth will be OUTRAGEOUS, and prices will be inflated based on what big event is happening on YouTube, or another video site.. If YouTube turns into a TV killer like Google wants then bandwidth will be on demand, and all these ISP's will be capping like no tomorrow, and bandwidth will be expensive.

  9. #34
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    Shouldn't be too big of a surprise, as anyone who's dealt with Level 3 sales reps the last few years will find that they've been quite happy to tout that they were going to buy GBLX for quite a while.

    Fundamentally, every provider has to buy transit from a Tier 1 somewhere along the line, unless they're a Tier 1 themselves. They can't just buy from a cheaper competitor of GBLX's, because all the other Tier 1's are more expensive. So, we should see the effect of Tier 1 pricing trickle down to everyone, and not just direct custoers of Tier 1's.

    Now, I'd pose that bandwidth pricing in the short term will go up, but long-term trending will still be downwards as it's always been. It's just that the short term pricing (last few years) has come down so much that a correction of sorts is long overdue. Pretty much all the Tier 1's have been losing money. Some of them are just being supported by their other business lines like cellular/wireless but the pure bandwidth plays like Level3 have pretty much never been in the black. Perhaps we will see that change soon enough.
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  10. #35
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    Quote Originally Posted by Spudstr View Post
    I tried telling people that prices are going to start going back up.... but yet no one seemed to believe me.

    L3 competed a lot against global crossing. Why compete any more.. just buy your competition.
    Honestly, I've been saying the same thing for a long time, and also reaping the benefits of cheaper and cheaper bandwidth. Level(3)'s pricing is actually not that far off of Tata, TiNet, Savvis, etc. The key thing to keep in mind is that per unit costs are going down, but per unit usage is going way up, just as quickly as the costs. We use 10x bandwidth as we did 4 years ago, and pricing is roughly 10x less costly.
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  11. #36
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    Quote Originally Posted by ReliableServers View Post
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  12. #37
    Quote Originally Posted by bluemer View Post
    It's only a matter of time before bandwidth/internet is just like oil is today. Mark my word. 20 years from now I will be 43 years old, and I bet bandwidth will be OUTRAGEOUS, and prices will be inflated based on what big event is happening on YouTube, or another video site.. If YouTube turns into a TV killer like Google wants then bandwidth will be on demand, and all these ISP's will be capping like no tomorrow, and bandwidth will be expensive.
    lol.

    As to the pricing of Tier 1 bandwidth affecting the prices of Tier 2 transit, it does have an effect, but doesn't have to be a huge one. Not all traffic has to hit a tier 1 network to get to it's destination, and even if you do have to, there's always going to be at least one provider out there willing to play ball on price to pick up market share.

    If all the tier 1's in a given region decide to play nasty and jack up prices to the moon, you'll just see hosting of high bandwidth content shift overseas, where the "expensive" networks don't have Tier 1 status, and will have to pay dearly to haul bits across the ocean, and to add insult to injury, will have to pay the "local tier 1" for access to *their* network. This is how things end up in a large number of places where the incumbent carrier charges way too much. Take Australia, or China, or Turkey. The incumbent providers there charge a pretty penny for access to their network from within their home territory, but it doesn't matter because those carriers end up buying backhaul to a major IX point and then buying transit from someone else or peering with who they can, at that IX point. Certainly this is not the position the US tier 1's are in now, but to think it can't happen is ridiculous. Hosting Turkish destination video traffic from the US works just fine for me, and I could just as easily host US destination video traffic from the UK if it would save a buck.

    If the prices of transit go up too much, it also makes peering more financially viable. Right now the price of transit is so low that peering isn't economically justified in a large number of cases. If right now I just hand off my traffic to L3 to take to provider X, and L3 triples their price, now it makes a lot more sense to go with Tier 2 provider Y who peers with provider X. L3's price change doesn't affect provider Y's cost as they already peered off the traffic to provider X, and it doesn't have to affect my price because I have plenty of Tier 2's to choose from, it just takes business away from the Tier 1's because they're no longer cost competitive.

    At the end of it all, if one ISP jacks up prices too much, they'll lose market share. If all the Tier 1 ISPs in a given region jack up prices too much, that entire region will lose market share to another region. There is no global bandwidth cartel, and there will always be a number of networks somewhere in a position to drive down cost, so any effect will be temporary.
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  13. #38
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    Quote Originally Posted by funkywizard View Post
    lol.

    As to the pricing of Tier 1 bandwidth affecting the prices of Tier 2 transit, it does have an effect, but doesn't have to be a huge one. Not all traffic has to hit a tier 1 network to get to it's destination, and even if you do have to, there's always going to be at least one provider out there willing to play ball on price to pick up market share.

    If all the tier 1's in a given region decide to play nasty and jack up prices to the moon, you'll just see hosting of high bandwidth content shift overseas, where the "expensive" networks don't have Tier 1 status, and will have to pay dearly to haul bits across the ocean, and to add insult to injury, will have to pay the "local tier 1" for access to *their* network. This is how things end up in a large number of places where the incumbent carrier charges way too much. Take Australia, or China, or Turkey. The incumbent providers there charge a pretty penny for access to their network from within their home territory, but it doesn't matter because those carriers end up buying backhaul to a major IX point and then buying transit from someone else or peering with who they can, at that IX point. Certainly this is not the position the US tier 1's are in now, but to think it can't happen is ridiculous. Hosting Turkish destination video traffic from the US works just fine for me, and I could just as easily host US destination video traffic from the UK if it would save a buck.

    If the prices of transit go up too much, it also makes peering more financially viable. Right now the price of transit is so low that peering isn't economically justified in a large number of cases. If right now I just hand off my traffic to L3 to take to provider X, and L3 triples their price, now it makes a lot more sense to go with Tier 2 provider Y who peers with provider X. L3's price change doesn't affect provider Y's cost as they already peered off the traffic to provider X, and it doesn't have to affect my price because I have plenty of Tier 2's to choose from, it just takes business away from the Tier 1's because they're no longer cost competitive.

    At the end of it all, if one ISP jacks up prices too much, they'll lose market share. If all the Tier 1 ISPs in a given region jack up prices too much, that entire region will lose market share to another region. There is no global bandwidth cartel, and there will always be a number of networks somewhere in a position to drive down cost, so any effect will be temporary.

    The only reason tier1's are increasing network capacity is for their voice, look at sprint, VZ etc their bulk traffic is not data but voice those oc192's are not exactly data its channelized voice. Sure the tier1's will add network capacity when they need it but whats going to happen to pricing when they start getting constraints? The world doesn't operate on just data, voice is a huuuuge part of it. And please don't tell me "oh they will use sip" no.. because in long haul transmissions thats not exactly how it works. Call quality due to timing is where sonet/tdm still lives strong, not over ethernet.

    As usual there is more to the story than what the obvious is.
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  14. #39
    If we are all making predictions, I'm going to say it will slow the decrease at the wholesale level. Some providers will be hurt because they base pricing on being able to make higher margins on the fall of costs per unit. One thing not mentioned is the number of sales people and their focus. These are two large sales groups that are in the same deals. If you ask both sales teams if the could get rid of one competitor they would say the other.

  15. #40
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    Quote Originally Posted by funkywizard View Post
    lol.
    As to the pricing of Tier 1 bandwidth affecting the prices of Tier 2 transit, it does have an effect, but doesn't have to be a huge one.
    Last months i have seen bandwidth prices (for resellers) from the bottom providers slowly go up. On the other hand, i have seen (reseller) prices from the top range (like Level3) fall a little.
    So the last months, the prices grew more close to eachother then ever.

    I have heard (strong) rumours in the market, that indicate that more mergers and takeovers are upcomming. If half of these rumours are true, then you start better prepare for a 'substantial' increase of bandwidth prices on the bottom of the market.
    With sub 1$ prices per mbit 95% the low end market seem to have hit a level, that seems to hover slightly below costs for carriers. The only way is up, at least for now.

    In short, my expectations on a 6 to 24 months are:

    - The lowest prices bandwidth providers (Cogent, HE) will increase their prices
    - The top end will stop dropping their prices, but i do not expect an actual increase there.
    - More consolidation amongst network providers, datacenter providers and infrastructure providers (like dedicated server providers, colocation providers).
    - What eventually will lead to an increase in price for the bottom of the market.

    I am sure people will come with arguments like: what about the deals like 100TB !
    100TB are great deals, but every provider who offer them (including our company) know that there is a certain limit of servers they can provide with 100TB. Its a marketing gimmick. If all servers in the world today will use 100TB and all these clients wants a 100TB server at the currently marketed prices, you will see that the deal is not profitable and the result will be: an enormous increase in the average price of a server+100TB. Why? because 100TB providers are simply selling overcapacity, every one of them.
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  16. #41
    Quote Originally Posted by Spudstr View Post
    The only reason tier1's are increasing network capacity is for their voice, look at sprint, VZ etc their bulk traffic is not data but voice those oc192's are not exactly data its channelized voice. Sure the tier1's will add network capacity when they need it but whats going to happen to pricing when they start getting constraints? The world doesn't operate on just data, voice is a huuuuge part of it. And please don't tell me "oh they will use sip" no.. because in long haul transmissions thats not exactly how it works. Call quality due to timing is where sonet/tdm still lives strong, not over ethernet.

    As usual there is more to the story than what the obvious is.
    Voice is really not where the action is on the bandwidth market. Maybe for the tier 1's, it's still a big deal, but in terms of data quantity across all providers, it's meaningless. Video is at 500 kilobits and up, voice at 64 kilobits or less, and a huge number of long haul minutes are moving to voip (internet) or cellular (lower bandwidth)
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  17. #42
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    Quote Originally Posted by funkywizard View Post
    Voice is really not where the action is on the bandwidth market. Maybe for the tier 1's, it's still a big deal, but in terms of data quantity across all providers, it's meaningless. Video is at 500 kilobits and up, voice at 64 kilobits or less, and a huge number of long haul minutes are moving to voip (internet) or cellular (lower bandwidth)
    You obviously missed the point about bandwidth and capacity/links tier1's put up. Voice is a HUGE part of the tier1 market. I would honestly say most of the "data" is pushed over tier2 networks than tier1.

    Remember we are talking about bandwidth as capacity which is part of providers overall network/network capacity. Data is not the only driving factor in todays world.
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  18. #43
    Quote Originally Posted by Spudstr View Post
    You obviously missed the point about bandwidth and capacity/links tier1's put up. Voice is a HUGE part of the tier1 market. I would honestly say most of the "data" is pushed over tier2 networks than tier1.

    Remember we are talking about bandwidth as capacity which is part of providers overall network/network capacity. Data is not the only driving factor in todays world.
    Maybe then the announcement about this should be on voicehostingtalk.com... oh wait.
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  19. #44
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    why is it that most interesting threads in this forum turn into an argument between funkywizard and spudstr?

  20. #45
    Quote Originally Posted by TQ Mark View Post
    why is it that most interesting threads in this forum turn into an argument between funkywizard and spudstr?
    Don't want to put words into his mouth, but I think we can both take that as a compliment
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  21. #46
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    Quote Originally Posted by funkywizard View Post
    Don't want to put words into his mouth, but I think we can both take that as a compliment
    Not really a compliment and its not the goal. Your comments full of information lack a lot of information at the same time. Only understanding "part" of something and commenting on a issue that deals with "part" of the issue and defending your stance on it when you have no hard proof or knowledge of the "full" situation is becoming a pattern and frankly misinforming. While I and I am sure a lot of other members appreciate your input and knowledge some aspects you are flat wrong or clueless on. You have a lot of learning to do.
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  22. #47
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    Quote Originally Posted by TQ Mark View Post
    why is it that most interesting threads in this forum turn into an argument between funkywizard and spudstr?
    Because they approach the market from different angles. Nothing wrong with that really, arguments (as long as they are done professionally) are part of a forum and part of what keeps it interesting.
    If everyone agrees all the time, then this site would turn into a boring place
    All kidding aside, it is alright to disagree. I like the fact that they both bring arguments on the table - not just disagree to disagree, like some tend to do.

    Quote Originally Posted by Spudstr View Post
    [to funkywizard] You have a lot of learning to do.
    We all still learn everyday, no matter how long your in the business, you never have seen it all. But experience does count, there is a lot that 'oldtimers' can predict, besides that, they usually have a large network of industry contacts and keep up to date with the latest developments. They 'feel the weather' and can predict were its going.... maybe i turn it to philosophic now
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  23. #48
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    I'm still wondering why people are acting like transit is all that matters in transit pricing. The biggest cost for a Tier 2 network is transport, not transit. The transport market as a whole is much bigger than the transit market. The competitors like Tinet, Tata, and even say nLayer, HE, etc. simply don't have the number of transport circuits and POPs that L3 and GBLX do. It is this consolidation of assets in the ground, the transport services, that I feel is going to stop the pace of pricing drops. Transit is such a small part of this that I don't see why it is getting all of the discussion. Yes, the fact HE buys transit from GBLX may increase their transit pricing to GBLX a bit, but that probably will not matter as they can get transit from 12+ other companies and redistribute their traffic. But when they're looking to turn up another POP in another city that is a very specific need (you can't move it around) and now there is one less fiber provider so now there are only 2-3 carriers with that route instead of 3-4, the pricing will probably be higher.
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  24. #49
    To chime into the conversation in an attempt to put Karl's thoughts in a different manner....

    funky, what Karl (and others) are trying to point out is that, you are correct that transit is not the only way that traffic gets hands off from one network to another. Peering relationships play a big role is routing traffic between networks. However, the network operators need a way to move their data (and voice) traffic from their network over to a common POP for this peering to take place. This movement of data is the "transport" that Karl is talking about and way as Karl mentioned is actually a much bigger piece of the market.

    Since I am going to use an example from a market that much more fiber dense than L3 and GBLX, keep in mind there are markets where this type of situation may exist and where a combined L3/GBLX may own the market.

    Lets saw between San Jose and One Wilshire (major west coast peering hub), the only providers that had fiber routes were Verizon, Level3, and Global Crossing. Prior to the merger, there was descent competition for Transport from a POP in San Jose back to One Wilshire for peering/transit services. Post merger, transport along that fiber route is likely to go up relatively significantly now that the only competition along that route is Verizon who we all know is not very pricing friendly. For the most part, a combined Level3 would be able to charge what they want along this route, as an ISP would either need to transport the traffic along a different, potentially longer (more latency) route back to One Wilshire, peer at a different location (which also may add latency), or build out their own fiber assets (most likely more expensive than just paying L3 what they want).

    Its the transport of the data along these fairly monopolistic routes that will help to force pricing upwards even from the HEs and Cogent's of the world.

  25. #50
    Quote Originally Posted by colomondo View Post
    To chime into the conversation in an attempt to put Karl's thoughts in a different manner....

    funky, what Karl (and others) are trying to point out is that, you are correct that transit is not the only way that traffic gets hands off from one network to another. Peering relationships play a big role is routing traffic between networks. However, the network operators need a way to move their data (and voice) traffic from their network over to a common POP for this peering to take place. This movement of data is the "transport" that Karl is talking about and way as Karl mentioned is actually a much bigger piece of the market.

    Since I am going to use an example from a market that much more fiber dense than L3 and GBLX, keep in mind there are markets where this type of situation may exist and where a combined L3/GBLX may own the market.

    Lets saw between San Jose and One Wilshire (major west coast peering hub), the only providers that had fiber routes were Verizon, Level3, and Global Crossing. Prior to the merger, there was descent competition for Transport from a POP in San Jose back to One Wilshire for peering/transit services. Post merger, transport along that fiber route is likely to go up relatively significantly now that the only competition along that route is Verizon who we all know is not very pricing friendly. For the most part, a combined Level3 would be able to charge what they want along this route, as an ISP would either need to transport the traffic along a different, potentially longer (more latency) route back to One Wilshire, peer at a different location (which also may add latency), or build out their own fiber assets (most likely more expensive than just paying L3 what they want).

    Its the transport of the data along these fairly monopolistic routes that will help to force pricing upwards even from the HEs and Cogent's of the world.
    I would agree with the majority of this point. However, everything is not so simple as there are many moving parts in this market. In one way, a reason for not having more competitors is because there are already enough competitors. There had been a big to-do about a company buying up spare fiber capacity and selling the dark fiber capacity to end users. The reason for the controversy was that the existing carriers were hoarding their own fiber in order to keep prices up, and they didn't appreciate a third party coming in and making more fiber available.

    To a certain extent carriers will be able to raise prices through mergers, and to another extent, higher prices will itself create more supply, as business models that were not viable become viable as the number of competitors drops. Maybe there aren't too many companies out there who own fiber in the ground, but there are plenty that have a long term lease on it. If the price goes up and there is still demand, someone can come along and make better use of the existing fiber. There may be a shift of business models, but the actual price increase can only go up so far without the existing carriers cutting off their nose to spite their face. Maybe prices will go up because of heavier reliance on DWDM, or maybe prices will go up because you have to go to a third party who isn't really focused on selling fiber capacity but happens to have some available. Or you may even see increased investment in fiber capacity if the existing owners of that capacity simply refuse to sell access to it.

    The end result is there will be some interesting shifts, but 1) it will take time for people to see increased prices because of existing term contracts and because expansion needs don't happen overnight, and 2) Other companies will come in to fill the void and take market share during this process. This part will also take time, but because the increased prices can't happen overnight, it's ok that the increased supply won't happen overnight either.

    Increased turbulence, I'll buy that. Industry wide and sustained increased prices? I doubt it. On a year over year time horizon, for transit prices across the broader market, even an event this large is unlikely to have that kind of impact.
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