Every year, the telecom industry invests hundreds of billions on network expansion, which will rise by 2%-4% in 2020. Not surprisingly, the outcome is predictable: bandwidth prices keep falling.
As Telegeography reported, several factors accelerated this phenomenon in recent years. Major cloud providers like Google, Amazon, Microsoft, and Facebook have altered the industry by building their own massive global fiber capacity while scaling back their purchases from telecom carriers. These companies have simultaneously driven global fiber supply up and demand down. Technology advances, like 100 Gbps bit rates, have also contributed to the persistent erosion of costs.
The result is bandwidth prices that have never been lower. And the advent of Software-Defined Networking (SD-WAN) makes it simpler than ever to prioritize traffic between costly private networks and cheaper Internet bandwidth.
This period should be the best of times for enterprise network architects, but not necessarily.
Many factors conspire against buyers who seek to lower costs for the corporate WAN, including:
- Telecom contracts that are typically long-term and inflexible
- Competition that is often limited to a handful of major carriers
- Few choices for local access and Internet at corporate locations
- The tremendous effort required to change providers, meaning incumbents, have all the leverage
The largest telcos, companies like AT&T and Verizon, become trapped by their high prices. Protecting their revenue base makes these companies reluctant adopters of SD-WAN and Internet-based solutions.
So how can organizations drive down spending on the corporate WAN, while boosting performance?
As in most markets, the essential answer is: Competition.
The most competitive marketplaces for telecom services in the world are Carrier-Neutral Data Centers (CNDCs). Think about all the choices: long-haul networks; local access; Internet providers, storage, compute, SaaS, etc. CDNCs offer a wide array of networking options, and the carriers realize that competitors are just a cross-connect away.
How much savings are available? Enough to make it worthwhile for many large regional, national, and global companies. In one report, Forrester interviewed customers of Equinix, the largest retail colocation company, and found that they saved an average of 40% on bandwidth costs, and 60%-70% cloud connectivity and network traffic cost reduction.
The key is to leverage CNDCs as regional network hubs, rather than the traditional model of hubbing connectivity out of internal corporate data centers.
CNDCs like to remind the market that they offer much more than racks and power as these sites can offer performance benefits as well. Internet connectivity is often superior, and many CNDCs offer private cloud gateways that improve latency and security.
But lower costs and the savings alone should be enough to justify most deployments. To see how you can benefit, contact one of our experts today.