The Economics of IP Transit

Since 2010, the global median price of a 10 GigE IP transit port has plummeted 90%. Yet, routing traffic in Africa or South America still costs orders of magnitude more than in Europe.

Regional Transit Pricing Disparity

In mature markets (London, Frankfurt, NY), Tier 1 networks compete fiercely. In developing markets, lack of submarine cable competition and lack of local peering exchanges keeps prices artificially high.

Hub Location2015 Avg ($/Mbps)2023 Avg ($/Mbps)Decline %
London (LINX)$0.70$0.06-91%
New York (NYIIX)$0.85$0.08-90%
Tokyo (JPIX)$2.50$0.25-90%
São Paulo (IX.br)$6.00$0.65-89%
Johannesburg (JINX)$15.00$2.50-83%

Data represents a full 10Gbps committed rate on a 1-year contract. Settlement-free peering is not included.

Tool: Transit vs. Peering ROI Calculator

Determine the financial breakeven point for establishing a physical presence at an Internet Exchange Point (IXP) to engage in settlement-free peering versus just paying for transit.

Common Mistakes in Bandwidth Purchasing

  • Focusing on unit price over commit levels: Providers offer $0.05/Mbps but require a 100G commit (minimum $5,000/mo). A $0.15/Mbps commit at 10G is better for a smaller network.
  • Ignoring routing quality: The cheapest transit provider often relies on suboptimal BGP routing. Cheap packets are useless if they have 200ms latency and 2% packet loss.

FAQ

Why is internet cheap in Europe and expensive in Australia?

Geography and market fragmentation. Europe has massive terrestrial fiber density and many independent operators. Australia relies on expensive submarine cables and historically faced a virtual monopoly by Telstra.

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