U.S. Network Consolidation

February 02, 2006

In historical terms, 2005 may be recognized as the year North American carriers finally turned the corner. Following years of destructive competition and pricing based on sunk costs, consolidation has begun to have an impact.The carrier network scramble has taken many forms: MCI paired up with Verizon. AT&T joined ranks with SBC. Wholesale specialist Level 3 acquired substantial assets from 360Networks, WilTel, and last week, Progress Telecom. Global Crossing and Broadwing continued to diversify into enterprise services.

At the same time, TeleGeography has begun to observe real signs of price stability in the wholesale market. Prices for wholesale SDH capacity in North America have not changed for six months. Strong demand for large capacity increments, combined with a smaller field of competitors, has handed some pricing power back to the carriers. If this trend continues, it may mark the first time in a decade that prices have held steady for a year.

Is this scenario likely? Despite huge potential network capacity, some carriers are running out of readily available — and already paid for — bandwidth inventory. When the sale of new capacity requires cash outlay it tends to hold back the most cutthroat prices. Of course, there are about 30 competitors still left in the U.S. long haul market, which could keep prices on the slide for a while still.

The data and analyses above are excerpted from two of TeleGeography’s core research services. They are:

Wholesale Bandwidth Pricing Database Service

http://www.telegeography.com/research-services/wholesale-bandwidth-pricing-database-service/

International Bandwidth Report & Database

http://www.telegeography.com/research-services/global-bandwidth-research-service/