The following pages are based on information from analyst firm Renesys. Its unique Market Intelligence database provides objective data on internet routing, presented here as a ranking of wholesale service providers by region. These figures from Renesys offer a glimpse of the commercial dynamics of the world of the IP backbone over the past year, across geographies and networks. Data is based on customer wins and losses, and competitive entries into new and developed markets.
Africa
In the space of a year, Level 3 moved from outside of the top 10 into pole position in Africa’s IP transit market (see figure 1). This drastic shakeup in the continent’s rankings comes in the wake of the vast amount of new subsea cable capacity now enjoyed up and down the west and east coasts.
“You’re starting to see people drop their use of satellite in favour of fibre communications,” comments Bob Fletcher, VP for worldwide sales at Renesys. “This has been the first full year for some of these new subsea cables, and their impact is showing. Africa is certainly not a sleepy market, and we’ve seen pricing fall, and new low pricing points settling in.”
While Level 3 is clearly picking up a lot of traffic as a result of new subsea cables such as SEACOM, Tata has also been successful in selling a lot of IP transit in Africa, moving from eight to a fifth position (see figure 2). With the continent expected to be served by more cables in the coming years, these providers as well as indigenous African providers, such as Vodacom, are well positioned to pick up the wholesale business.
renesys-2.gif Asia
Fletcher notes some significant dynamic shifts in the market for IP transit across Asia (see figure 3): “Traditionally in the Asian market, carriers have routed traffic via the west coast of the US. Now you’re seeing a lot more of that traffic staying intra-Asian, going direct from, say, Hong Kong to Kuala Lumpur.”
The result is reflected in this graphic in terms of success for a lot of Asia-based companies like PCCW (see figure 4): “They are being highly competitive with each other in selling routes within Asia,” he notes. “NTT is very strong in Asia too – as you’d expect. PCCW has been very aggressive and successful at the top end of the wholesale market. You can see the benefit of that here. They’ve picked up some big contracts.”
The rankings do not contain market movement from the Oceania region, where some large and important players like SingTel and Telstra lead the way. “The growth in intra-Asian traffic isn’t having a negative impact on trans-Pacific traffic, as that’s growing fast too,” says Fletcher. “Asian traffic growth will generally be a colossal growth area over the next few years. The market will favour those with facilities and infrastructure in the region, and foster some pretty tough competition on the way.”
Europe
Europe (see figure 5) is clearly not as dynamic a market as Asia or Africa, observes Fletcher: “It’s pretty well penetrated, and that shows in the lack of movement in the ranking,” he says.
“It certainly is quite a competitive market though, with a lot of pressure on pricing. Level 3 in particular has been very aggressive on the sales side. It used to be the case that all the hard pricing pressure was in the US market, while Europe was a more gentlemanly affair, but that’s certainly not the case anymore.”
It is notable, says Fletcher, that less of the running in the European IP network space is being made by the bigger US names that used to lead the list – Sprint and Verizon both move out of the top 10: “It’s companies who are dedicated to the market and pushing hard in it that are doing well and being successful,” he points out. “As prices come down, the winners are those who are big enough to take that lower pricing on board and still succeed. There’s an advantage in being big.”
Fletcher fingers Telecom Italia Sparkle for special attention (see figure 6): “TIS has been very competitive. There was a time earlier in the year when they lost a couple of customers, but have been on the up since. They’ve been pretty solid over the last couple of months after coming out fighting.”
South America
Three big companies dominate (see figure 7) – Global Crossing, Telecom Italia and Telefonica. Global Crossing has been particularly good at growing traffic to Miami, says Fletcher.
“On the whole, Latin America is a stable market,” he observes. “It is generally fairly tightly regulated still, so doesn’t tend to move tremendously fast. But it’s a market that was clearly of interest to Level 3, as they bought Global Crossing partly to give them a route into the market that they didn’t have.”
There was an ongoing rivalry between Telefonica and Telecom Italia Sparkle (see figure 8) throughout 2011, and I’d expect that to continue next year. But with this ranking, all you’ve got to do is lose a couple of big customers and you drop a couple of places.”
North America
The three most aggressive players in North American IP transit (see figure 9) have been Level 3 and Global Crossing, now merged, and Cogent.
“Also interesting is Comcast,” believes Fletcher. “What they’ve done is build their own broadband network coast to coast, rather than just depend on AT&T. A few years ago they were AT&T’s biggest customer. They’ve made a success of breaking into the IP transit market, as a very aggressive value-oriented provider. In an economic slowdown, being value oriented is an advantage. North America, like Europe, is about fine margins and pricing counts.”
Fletcher also pinpoints Cogent as one to watch (figure 10): “They’re good at just keeping on doing what they do, and their competitors hate them. They create price points that are very disruptive to the rest of the industry. Incumbent interests like static, stable markets, and Cogent like to do all they can to break that up.”
Global
“You can see overall that there has been a changing of the guard,” points out Fletcher (see figure 11). “Traditionally the top 10 have been predominantly US companies – certainly 10 years ago they were. Sprint used to be number one, but is falling down the ranking now that they are not as focussed on the transit space as it once was. Verizon likewise is not as dominant as once upon a time. Tata on the other hand, as with NTT, is starting to benefit from its focus on emerging markets on a worldwide basis. This gives them the ability to develop new business fast in growth markets. Tata can take advantage of these markets (see figure 12) as they come online and it already has the investment there. This is a trend that I see continuing – encouraged by factors like the adoption of smartphones in these emerging markets. They won’t be iPhones, but inexpensive versions of the smartphone model. But they’ll generate a lot of traffic nevertheless.”
About Renesys
For more information about this article or Renesys, contact Bob Fletcher, VP of worldwide sales at: bobf@renesys.com
This information has been prepared by Renesys, a leading authority in global internet intelligence, providing products, services and thought leadership to enable carrier organisations to confidently and securely operate critical business processes on the internet. Operating a real time global sensor grid that continuously monitors, collects, analyses and correlates internet routing data with other intelligence, Renesys makes doing business over the internet more reliable and secure by providing a comprehensive view of connections around the world and inside the cloud.
