Many retail broadband consumers are oblivious to the cost of bandwidth. For the majority of those here in the U.S., the monthly charge for a broadband connection is roughly $50 a month. The cost of wholesale bandwidth, however, is an entirely different story. TeleGeography, which researches telecom trends and data, recently looked at what $15,000 a month would buy in terms of wholesale bandwidth.
The price differences among various locations across the globe were as jagged as the peaks of the Himalayas. (See chart.) For example, the median price of a 2 Mbps E-1 circuit between London and Johannesburg in the fourth quarter of 2008 was nearly $15,000. For that same amount, you could get a 10 Gbps wavelength — 500 5000 times the capacity of an E-1 — between London and New York.
The variations can largely be attributed to the numerous network build-outs taking place, as well as the number of competitive bandwidth providers. For instance, there are a lot of companies with fiber on the trans-Atlantic route, and as a result, a lot of bandwidth is available there for cheap. On the other hand, bandwidth costs to various African cities are extremely high because there aren’t that many cables in place. That might change with the many new cables currently under construction. Africa and Asia are two regions where a lot of new cables are being constructed, which is going to both help reduce bandwidth prices and spur demand for bandwidth-heavy applications and services.
The availability of cheap bandwidth can have a major impact on businesses and economic activity, as I argued in an earlier post, Can Optical Cables Predict Economic Shifts? In Africa, the growing bandwidth demand comes from a boom in mobile services, which, in turn, benefit when bandwidth prices fall and connections become aplenty. It is a virtuous cycle.