TeleGeography Workshop: International Market Trends Sponsored by

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Today’s Batting Order Where Networks Connect: Colocation Market Trends — Stephan Beckert Global Bandwidth & IP Transit Pricing Trends — Brianna Boudreau The Dystopian Future of International Networks — Alan Mauldin

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Where Networks Connect: Colocation Market Trends Stephan Beckert [email protected]

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Where Networks Connect

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Where the nodes are, 2015 Largest Retail Colo Markets, 2015

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Space is growing Gross Retail Space, 2011 vs 2015

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Colo is geographically concentrated Gross Retail Space, 2011 vs 2015

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Who owns all that space? Largest Retail Providers, 2015

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The big are getting bigger Major Transactions, 2015 Buyer

Seller

Value

Equinix

Telecity

$3.6 b

Digital Realty

Telx

$1.9 b

NTT

e-shelter

€742 m

Zayo

Latisys

$650 m

Tierpoint

Windstream Data Centers

$575 m

Cyrus One

Cervalis

$400 m

QTS

Carpathia

$326 m

vXchange

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What does colo cost? Median Baseline Price Q2 2015

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Prices ranges are wide Baseline Price Range, Q2 2015

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Spot the pattern Median Cross Connect Prices, 2h. 2015

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Cross connects can matter TCO with 1 cross connect

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Cross connects can matter — a lot TCO with 5 cross connects

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Prices are stable Colo vs. IP Transit prices, 1h. 2014 – 2.h 2015

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Outlook

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Global Bandwidth & IP Pricing Trends Brianna Boudreau [email protected]

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Overview • • • •

Wholesale Bandwidth Price Trends End-to-End Cost Components Technology & Cost Improvements IP Transit Price Trends

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Wholesale Bandwidth Pricing

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1 Bandwidth price erosion has been most rapid on routes where new supply has come online. 1 Despite universal price erosion and an influx of new capacity in many markets, geographic price differences persist. 2 Long-haul submarine capacity still comprises the largest portion of a circuits end-to-end cost across all major subsea routes.

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Bandwidth Prices Continue to Fall Median 10 Gbps Monthly Lease Prices, 2015

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But Still Vary By Geography

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And By Carrier Median & Price Range for 10 Gbps on Los Angeles-Tokyo, 2012-2015

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End-to-End Cost Components

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Backhaul Impacts Price Median PoP-to-PoP 10 Gbps Price Components, 2015

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Local Access, The Longest Mile Median End-to-End FastE Price Components, 2015

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Technology & Cost Improvements

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1 While 100 Gbps service prices are declining, the pace of price erosion lags behind 10 Gbps wavelengths. 2 As competition for 100G increases, carrier price multiples have converged. 1 Ethernet is a cost-effective option for point-to-point services, providing over 50 percent more capacity for less than the cost of an SDH circuit in some cases.

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The Evolution of 100G Pricing 10 & 100 Gbps Prices & Multiples on Key International Routes, 2015

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Prices & Multiples Vary by Carrier Chicago-New York 100G Prices & Multiples by Carrier, 2015

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For Whom the Bell Tolls….(SDH) Median Prices for SDH & Ethernet on Frankfurt-London, 2015

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Ethernet Prices by Transport Technology Median GigE Prices for EoMPLS, EoDWDM, and EoSDH/SONET, 2015

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Ethernet Price Trends Median FastE EoMPLS Prices on Key International Routes, 2015

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IP Transit Pricing

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1 After years of relentless decline, the pace of IP transit price erosion has slowed across major cities. 2 Low prices in London, a critical international traffic hub, have fallen to the $5 per Gbps mark. 3 Transit is more expensive in markets that remain largely dependent on long-haul links to Europe or the U.S. to gain international connectivity.

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IP Transit Prices are Still Falling 10 GigE IP Transit Price Declines in Major Cities, 2012-2015

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But Geographic Price Differences Persist

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The Evolving Wholesale Market • • • •

New Supply Shifting to 100G IP transit pricing Future Products

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PTC Presentations to Come? Implied Price per Gbps per Minute, 2015

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The Dystopian Future of International Networks Alan Mauldin [email protected]

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What’s a dystopia? • It’s the opposite of a utopia (A mythical place with constant sunshine, rainbows, and stable bandwidth prices) • A dystopia is an imagined place or state in which everything is unpleasant or bad, typically a totalitarian or environmentally-degraded one.

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Dystopian trait 1: A figurehead or concept is worshipped by society

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Who is this man? • Gordon Moore

• Moore’s Law states the number of transistors on a circuit was doubling approximately every 2 years (implied annual growth of ~41%). • This law is assumed to apply to technology more broadly, even to bandwidth demand. Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | www.telegeography.com | [email protected]

Has demand growth been “Moore’s Law”-ish?

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The magic of compounding Used Bandwidth Forecasts – Moore’s Law

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The magic of compounding Used Bandwidth Forecasts – TeleGeography Forecast

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Dystopian trait 2: Concentration of power among an elite group

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Private network growth outpacing Internet backbone growth... Internet Backbone Operators vs. Private Networks

38%

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...but concentration is happening in both categories Top 5 Content Providers + Top 5 Internet Backbone vs. Everyone Else

47%

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Concentration is most extreme on the main transoceanic routes Trans-Atl & Trans-Pac Top 5 Content Providers + Top 5 Internet Backbone vs. Everyone Else

72%

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Dystopian trait 3: Dehumanization

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Data centers driving bandwidth demand growth

Major Content Provider Data Center Locations, 2015

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More on the way

Major Content Provider Data Center Locations, 2017

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Dystopian trait 4: Resource exhaustion

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Capacity exhaustion? Lit and Potential Trans-Pacific Capacity 2015-2025

Potential of existing cables 2015 Exhaustion in mid-2018

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Capacity exhaustion? Lit and Potential Trans-Pacific Capacity 2015-2025

Potential of existing cables plus FASTER, SEA-US, & NCP

Exhaustion in 2021

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Capacity exhaustion? Lit and Potential Trans-Pacific Capacity 2015-2025 Potential if all older cables could theoretically accommodate 100 x 100G

Exhaustion in 2023

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Capacity exhaustion? Lit and Potential Trans-Pacific Capacity 2015-2025 Potential with adding 1 new 72 Tbps cable

Exhaustion in mid-2023

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Dystopian trait 5: Citizens conform to uniform expectations

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Prices perpetually decline, but are they “conforming” (becoming similar)? Median Monthly 10 Gbps Wavelength Lease Price, 2010-2015

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Transport price differences narrowing 10 Gbps Wavelength Lease Price Multiples over London-New York

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What about elsewhere? 10 Gbps Wavelength Lease Price Multiples over London-New York

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Dystopian trait 6: Prevalence of violence

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Submarine cables are continued targets of violence • Sharks Sharks and other fish bites were 0% of cable faults 2007-2014, according to ICPC

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Submarine cables are continued targets of violence • Sharks • Russian submarines painted like sharks

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Submarine cables are continued targets of violence • Sharks • Russian submarines painted like sharks • Actual causes of most damage: – Fishing – Anchors

Cause of External Aggression Cable Faults, 2007-2009

Source: Trends in Submarine Cable System Fault, M. Kordahi, S. Shapiro, & G. Lucas

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Dystopian trait 7: Increased Surveillance

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attend TeleGeography’s SubOptic 2016 Masterclass for More information Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | www.telegeography.com | [email protected]

Outlook • Demand growth will remain strong ~30-40% per year. • A small groups of companies will likely account for a larger share of international capacity. • Investment in new cables and technological advantages will delay the risk of capacity exhaustion. • Transport price differences will continue to narrow. • Sharks and Russian submarines painted like sharks will not damage many cables.

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Questions?

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