Level 3, WilTel, and Price Stability

Calling the Bottom?
Level 3's acquisition of WilTel represents a major U.S. market consolidation and another step on the path toward price stability for long haul network services. Could this signal the bottom of the bandwidth market?

Within the United States, bandwidth prices have been leveling for almost a year on some major routes. For example, average pricing for 155 Mbps leased lines between Los Angeles and San Francisco have only declined 5% in the last year; on the New York-Washington, DC route prices have actually increased (Source: Bandwidth Pricing Database Service).

In the Internet transit business, prices for Gigabit Ethernet access have descended over 20 percent in major U.S. cities since mid-2004. Compared to the 50 percent drop of the preceding 12 months, this recent trend is much more encouraging for major IP transit sellers. In fact, traffic growth is matching or surpassing price declines in many global cities (Source: Global Internet Geography).

Glut Perspective
Although details have yet to be specified, Level 3 has indicated its intention to remove overlapping network elements where possible, reducing the inventory of lit bandwidth on many routes around the country. While this will have a measurable effect on bandwidth supply, the overall impact on competition will be small. Over 30 major networks will still be competing around the country for long-haul network business (Source: International Bandwidth).

Network Comparison (as of early 2005)

Cities Connected on Long Distance Network
Level 3: 92
WilTel: 115
Total Unique Cities: 152

Metropolitan Area Networks
Level 3: 43
WilTel: 47
Total Unique Metropolitan Networks: 66

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

Bandwidth Pricing Database Service
http://www.telegeography.com/products/bandwidth_pricing

International Bandwidth Report & Database
http://www.telegeography.com/products/ib

Global Internet Geography Report & Database
http://www.telegeography.com/products/gig

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Press Releases

	2005
15 December Brazil and Nigeria Fastest-Growing VoIP Destinations 10 November International Voice Market Improving 31 October Level 3, WilTel, and Price Stability 19 October Quarterly Wireless ARPU Down Worldwide 6 October TeleGeography Update: Vonage IPO 22 September TeleGeography 2005 Colocation Rankings 7 September International Internet Rankings for 2005 23 August Internet Traffic Growth Slows by Half in 2005 25 July VSNL Buys Top VoIP Carrier: TeleGeography's View 15 July Stability in the Atlantic Capacity Market? 15 June 30% of U.S. Broadband Subscribers Have Never Heard of VoIP 31 May U.S. Residential VoIP to Exceed $1bn in 2005 9 May Top and Bottom Wireless Markets 28 April PriMetrica, Inc. Acquires Singapore-based MMS Consultancy 20 April Most Intercity Bandwidth Still Unlit 7 April Bandwidth Demand Outpaces Price Declines 17 March Who Still Sells IRUs? 24 February TeleGeography Wholesale Market Predictions for 2005 16 February High Mobile Termination Rates in Europe Draw Carrier Interest 26 January Metro Fiber Price Exceeds Long-haul

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