Latam Special: Latam capacity and pricing trends

August 07, 2012 01:11 PM

Exclusive data on the Latam market brought to you in collaboration with TeleGeography.

In the past three years, carriers have rolled out standard pricing for 10G wavelengths as it has become a key transport product on the routes between Latam and the US. Some of the price decline shown in Figure 1 can be attributed to that change, as well as the cost for 10G technology coming down.

Prices are still relatively high, however, compared to similar routes in the trans-Pacific (see Figure 2), which have experienced a dramatic increase in supply. The median 10Gbps wavelength price on routes between LA and Tokyo is approximately one-third of the median 10Gbps price between Miami and São Paulo.

TeleGeography expects the launch of new subsea cables in Latam to help drive down the median 10Gbps price in the region over the next two years.

IP transit prices are directly related to transport prices and so the large decline shown in Figure 3 can be partly attributed to the availability of 10G wavelengths at a much lower cost per bit.

The majority of IP transit for Latin America, however, remains in the US. While other regions have significantly reduced their dependency on the US, Latin America has become even more attached to the nation for its IP routes.

As a result, for some carriers the price of transit in Latin America is less important than the price of transport to Miami, where most Latin American IP traffic is exchanged. Figure 4 illustrates how Latam’s median IP transit price is among the higher middle bracket globally.

Lit bandwidth on cables between US and Latin America grew 80% between 2009 and 2011 (see figure 5), but there’s no risk of a capacity shortage. In fact, the inventory of potential unlit capacity has grown faster than lit bandwidth, even though no new cables were deployed.

A cable’s potential capacity is not a static figure, but rather an engineering estimate made on the basis of existing optical technology.

In 2010, potential capacity soared, as most carriers serving this route updated their estimates of potential capacity to reflect 40Gbps technology, and will likely increase again soon to reflect 100Gbps technology.