Bandwidth Glut Yet to Surface

Posted: 02/2000

Bandwidth Glut Yet to Surface

any camps exist that believe the U.S. domestic bandwidth market will tumble as new
technologies that utilize the existing fiber for higher bandwidth throughput are
introduced.

The increased bandwidth is expected to outpace bandwidth demand and drive prices
downward. However, the Real-Time Bandwidth Exchange*Revealed Price Index (RTBX*RPI), which
tracks the current weighted average price, shows that prices have stabilized during the
past several months.

The RTBX*RPI, applied to DS-3 bandwidth for major U.S. East-West routes and displayed
in the accompanying chart for RateXchange trades, indicates that prices have fallen a mere
1.31 percent since June 1999, as compared to 10.39 percent for the same period the prior
year.

The price stability demonstrates that one of the following conditions exist in this
market: bandwidth capacity has not grown at the rate that technologists predicted or
bandwidth consumption has increased with bandwidth availability to keep demand in line
with supply.

The second condition seems more likely, as the standard unit of bandwidth measurement
in the wholesale market has been shifting away from DS-1s to DS-3s.

One reason bandwidth capacity may not have grown is that facility owners have had
reasons to release excess capacity to the market. As long as price stability exists, it
seems unlikely that facility owners will inflate bandwidth supply.

One question remains: How long will this condition last?

In the international termination rate market, the more mature European market is seeing
signs of an upturn as evidenced by increases in the major European routes: UK +50 percent,
France +20 percent, Austria +17 percent, and Germany +30 percent. The rates on less mature
routes are continuing to slide as gray market products continue to make up a large portion
of the traffic.

DS-3 Bandwidth RTBX*RPI
and RTBX*RFP-360 Indices