Bandwidth prices to make you cry

Answering questions at a Telecom Exchange event recently, Hunter Newby of Allied Fiber said that “You can buy a megabit today for fifty cents [50 USD cents = R3.36]. In five years, it could be ten megabits for the same price.”

Newby explained that fifty cents is the price if you’re the size of an MSN buying 100 gigabits. “For a small customer buying 1 gigabit, he said you could expect a price as low as a dollar or two at a major connection point, $5-10 at a regional hub,” said Newby.

According to well known broadband and telecoms analyst Dave Burstein from DSL Prime the continuing price drop is great for everyone except those selling bandwidth.

Lower bandwidth prices are however good news for broadband providers. “The drop in transit costs allows carriers to keep prices level despite the 25-40% growth in Internet traffic every year,” said Burstein.

Fast Net News provided the following pricing guidelines on “how to convert from costs per continuous megabit to other contexts”:

  1. $1 [R6.72]/customer/month on a large cableco or telco. “Large means you have fiber throughout your network and enough volume to use it efficiently”.
  2. $2-5 [R13.44 – R33.60]/customer/month for an efficient small telco lucky enough to cheaply connect to a regional hub.
  3. $5-20 [R33.60 – R134.40]/customer/month if too small to buy bandwidth efficiently, especially if monopoly-like bandwidth pricing prevails locally.

“These prices do not apply to rural carriers who aren’t lucky. Some pay $100 or $200 for that same megabit. Wireless costs are much higher, although much lower than most people think,” Fast Net News reports.

In South Africa local transit costs are still very high despite price drops over the last few years.  This is one of the main reasons why MWEB stopped paying for local transit in late 2010, promoting  free and open peering as the best way forward.

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Bandwidth prices to make you cry