Introduction

Since TNC started tracking network and telecoms price trends in 2005 we have seen a number of key constants across the majority of network and telecoms services:

  • Declining cost
  • Increasing demand
  • Rapid replacement by new technology

TNC has a unique insight into the market as we are able to see a very broad range of pricing across multiple services, representing all major business sectors, differing scales and importantly numerous different service providers, including both the established dominant providers as well as niche or disruptive vendors.

TNC’s analysis of this data has enabled us to build a model which captures the trends we see repeated across almost all services. The key headline from this model is that, for the majority of services, we see pricing decrease over time until the plateau phase towards the end of the service’s life.

For some services the competitive and plateau phases can last many years whilst regulated services or uncompetitive markets can distort these trends.  

The chart below shows TNC’s analysis of these price trends over time as services come into the market, mature and ultimately head towards retirement: 

The below table and the commentary that follows focuses on some of the most relevant services primarily from a UK perspective but includes Global WAN, and sets out TNC’s analysis of where each service is in its pricing lifecycle and therefore the price trends we can expect to see for these services in 2020:
Service Phase Pricing Demand
Global MPLS Reactive Falling Demand falling
UK MPLS (Ethernet) Ultra-competitive Large falls Demand still high (especially bandwidth)
FTTC/ADSL2+ Ultra-competitive to Reactive Price falls are decelerating heading towards a plateau Demand dropping off a little (4G, FTTP and Ethernet as alternatives)
ADSL/EFM Niche/Retirement Flat Very low (4G, ADSL2+, FTTC as alternatives)
SD WAN Maturing Slight falls Increasing
4G Ultra-competitive Large falls Continually Increasing
Traditional Voice Plateau/Niche Flat Decreasing (but long tail)
IP Voice Ultra-competitive Large falls Continually Increasing
MPLS (Ethernet Access)

Depending on the market being considered and the bandwidth requirement, TNC’s assessment is that we are in the ultra-competitive phase or the reactive phase.

For global MPLS services we’re now in the reactive phase with competition from internet services helped by the marketing and capabilities of SD-WAN services and global aggregators specialising on internet access.

In the UK at low end bandwidths TNC has definitely seen pricing reacting both to significant competition from insurgent suppliers but also a reaction to widespread availability of services like FTTC. In the coming months and years 5G access is likely to cause a further reaction in this space and we’re likely to enter the defensive phase where MPLS providers would rather get something rather than nothing in terms of returns on their long built and paid for MPLS networks

Globally the picture is mixed but generally pricing is also going down for similar reasons but in addition we are seeing regional and global providers’ pricing react to multinationals using local internet access as a cheaper alternative.

For all geographies, the scale of bandwidth demanded is pointedly on the up. 10 years ago the default Ethernet service for most sites was 2Mb, 5 years ago 10Mb, 1 year ago 50Mb and we’re now entering the territory of 100Mb being the typically requested service. This of course skews the comparative view of costs; indeed, it is very hard to even buy 2Mb circuits now.

Internet access is very similar to MPLS in terms of its lifecycle – regional differences are seen, and generally increased bandwidth is being demanded by users.  

FTTC/ADSL2+

Generally in the ultra-competitive phase and likely to be under pressure from 5G (indeed already some pressure from 4G) over the coming months and years. FTTP is also having an impact particularly as demand for higher upstream bandwidth outstrips xDSL based capabilities. Moving quickly to the reactive phase and, as improved coverage of 5G and FTTP and bandwidth requirements increase, it is likely these will become niche products. Also being squeezed by the reducing commercial delta to Ethernet meaning some customers are willing to pay a little more to upgrade to Ethernet (in the past the delta was larger and thus the commercial decision was clearer).  

ADSL/EFM

Niche and heading towards retirement – prices have stabilised and generally the only reason to choose these services now is due to unavailability of other superior products. As ADSL2+, FTTC, FTTP and 4G/5G coverage increases we are likely to find fewer and fewer locations where ADSL or EFM are the only viable option and thus demand is likely to fall as the ease of mobile access, bandwidth offering of all of the alternatives and especially the mobile pricing offers superior options.  

SD-WAN

The cost of this overlay technology is coming down as the industry shifts from the early adopter phase and begins to mature. TNC is seeing considerable consolidation around a few lead providers and the pricing reflects providers having to help with the business case for those organisations that are more price sensitive and/or do not value the features of SD-WAN to the same extent as the early adopters. 

Mobile

4G is undoubtedly the standard service and is ultra-competitive at the moment and is likely to continue for a couple more years. However we are at the beginning of the 5G era and, as one might expect, this is in the New phase but will remain complimentary to 4G rather than as a direct competitor. Generally, we are seeing greater levels of data consumption so while price per Mb is coming down, spend isn’t decreasing quite as fast as unit pricing would suggest. We are also seeing the beginnings of unlimited data packages particularly on 5G. Looking at global roaming pricing, re-zoning is seeing more countries being taken out of the “eye watering” territory so generally cost is coming down but again data usage in particular is growing. For the remaining exotic/difficult countries, bill shock remains a risk on some tariff offerings. Of course no-one really considers 2G or 3G now and retirement plans are irrelevant for most users when 4G and 5G have taken over but for some it is still important such as those that use IOT on 2G consider the needs of utilities companies that have literally sunk hardware investment that is buried underground and integral to the water or energy network or to the massive deployment of smart meters dependent on 2G. 2G in particular for this reason is in the Niche phase whilst ironically its successor is already marching toward retirement and thus 2G will outlast 3G. 

IP Voice

The use of SIP trunks is now the main approach to voice provision and this product set is now entering the ultra-competitive phase. Pence per minute rates are as low as traditional voice and many standard calls are included as part of the rental.  

Traditional Voice

PPM and Line Rentals – Plateau moving to Niche with Retirement on the horizon. With IP Voice now the leading approach to new voice few organisations are actively procuring PSTN or ISDN services. No doubt there are still many incumbent users, but pricing has plateaued, in some part due also to regulation. Many countries regulators and providers are planning the sunsetting of these technologies over the next few years but as some of these services are so imbedded the tail to replace them may be long unless this is provided by a supplier side migration process. 

Conclusion

TNC’s analysis of the market is showing that prices are declining to a greater or lesser extent in almost all technology areas, and this trend is likely to continue through 2020 and beyond.

However, TNC recognises that it can be difficult for individual organisations utilising these services to know where they are on the cost journey, and it can be harder still to ascertain the competitiveness of your suppliers if they are offering you new products, or increased capability or bandwidth.

As the market-leading consultancy specialising in network, telecoms and mobility strategy and procurement, TNC is ideally placed to help you make that assessment, and to ensure your pricing remains as competitive as possible.

If you’d like to discuss your pricing, product set or supplier, then please get in touch - we’d be delighted to share our experience and expertise. 

Disclaimer

Other than matters relating to The Network Collective, this research is based on current public information that we consider reliable. Opinions expressed may change without notice and may differ from views set out in other documents created by The Network Collective. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.

This research does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Network Collective Limited © 2020

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