The decline of Internet Protocol (IP) transit services costs has had an impact on the telecommunications industry. However, adding to the complexity of the situation is that the price reduction has not been the same throughout the world.
According to a report by TeleGeography (News - Alert), prices have certainly dwindled in major developed cities like London and New York. Even the IP transit prices in South Africa have taken a downward turn, but not to the same degree.
However, South Africa is also showing that the IP transit costs are only a small percentage of its whole network cost. This is helping to explain why the downward nature of the cost of IP transit is not having the impact one would expect.
The positive aspect to this dwindle-down of IP transit cost is that the consumer is seeing it on their monthly bill, but only slightly as the IP transit cost represents only a small portion of the bill. What’s been more impactful is the international connectivity achieved through installing undersea cables for DSL connectivity on the African continent.
At the outset, international IP transit costs are high because of the installation of the lines, but the company that installed the lines said the costs will decline eventually. In some cases though, it’s unclear whether the savings in IP transit costs are actually passed down to the customers. Wholesale customers can buy Layer 1 private leased circuits or international IP transit.
In many cases, it’s expected that the wholesaler will take those monies and invest in more IP transit for redundancy purposes. The company that installs the undersea cables assures that the savings are indeed passed on to the customers, and that it would be hard to take advantage of the customers because of the inherent transparency of the IP transit cost process.
The biggest expense in developing a network is in building international capacity as well as domestic connectivity through connecting to the biggest IP transit hubs. Through establishing this connectivity, providers can bring a much-improved network with outstanding efficiency and uptime.
This connectivity is made even more valuable by the improved technology of broadband devices, which can be afforded in part through the savings Web Africa sees in the reduced IP transit costs. The next step will be finding a way to reduce the cost of telephone line rental and ADSL line costs, which can represent up to 90 percent of a consumer’s total cost in South Africa.
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Edited by Rachel Ramsey