Bandwidth pricing lessening in importance? - Europe and US - Industry Overview

Established carriers are presently enjoying the luxury of increasing their bandwidth charges on some routes. Price, apparently, is no longer the principal consideration for bandwidth buyers -- quality of service guarantees and forming stable supplier relationships are now deemed to be at least as important as the cost.

This is according to new research published by TeleGeography, a telecoms statistics and analysis company, which notes that long-haul bandwidth prices on many major routes are stabilising -- and even rising -- in recent months.

"Price isn't as important as it once was for the majority of bandwidth buyers in Europe and the US," says Alexandra Rehak, director of European operations for TeleGeography. "Today, they're just as seriously looking at the overall quality of the service and the stability of individual carriers."

Nevertheless, Tom Wright, director of pricing for PBI Media, argues that -- rather than seeing a stabilisation in bandwidth charging -- a second carrier pricing war is on its way. "The market hasn't consolidated that much, and this is due to chapter 11 carriers managing to recover and re-enter into the market," he argues. "They've been able to do this because filing for bankruptcy has allowed them to significantly reduce their cost base, which means that they'll be able to reduce their prices considerably."

He believes that this is bad news for the carriers who can't file for chapter 11 because they'll have to 'follow the traditional market logic of staying in line with their competitors in order to win deals'.

But TeleGeography's Rehak argues that -- although there will be a few short-term price wars on individual routes as a result of aggressive chapter 11 players re-entering into the marketplace -- the industry won't be affected overall. "These recently bankrupt carriers may well offer very low prices but the buyer will still assess their quality of service and whether they'll be around in six months time."

Rehak attributes the two companies contrasting opinions to differing research techniques. "PBI Media researched four routes, talked to five carriers and found that three had recently lowered their prices," she says. "We spoke to over 50 carriers to find out what is going on across the entire worldwide market and have discovered that a price trend of stabilisation is definitely developing."

COPYRIGHT 2002 Horizon House Publications, Inc.
COPYRIGHT 2002 Gale Group