Bandwidth costs halved since 2008

The cost of bandwidth has fallen below 2008 levels thanks to increased competition in the market and the availability of high-speed fibre connections, according to a survey by Point Topic.

The telecoms analyst looked at pricing from 3,000 global providers and found that bandwidth costs are now roughly half what they were in 2008.

Increased competition has "squeezed" the market, Point Topic said, and created a situation that is beneficial for customers in terms of speed and cost.

"DSL prices in particular are being squeezed. Competition between operators and access technologies is driving the search for more markets, and DSL is well placed to capture customers who don't need full-speed 24/7 bandwidth," said Oliver Johnson, chief executive at Point Topic.

Per-megabit costs are becoming of less interest to end users, according to the report, particularly as their choice of providers widens.

"Many people do not use their broadband for more than a couple of hours a day, and when they do it's often for applications that use relatively little bandwidth," Johnson said.

"They care much less about the cost per megabit, where fibre has the edge, than about the upfront and monthly charges, and DSL wins that battle hands down. "

Fibre connections are finding their place in more advanced markets, and Point Topic found that it is becoming increasingly normal for new buildings to have this built in from the start, boosting take up and cutting costs.

"Fibre-to-the-building is a popular way of providing broadband. An increasingly common model in many markets is for a block of flats to get a fibre connection, and to have the bandwidth delivered over a LAN to the individual units," said Johnson.

Prices have not fallen everywhere, however, and have actually gone up in the Asia Pacific region, Point Topic found.

Prices in the UK were ranked 24th in terms of value for money in November last year, suggesting that local providers have some way to go before their services are truly competitive on a global scale.

Ofcom released research in December showing that the UK is lagging behind on high-speed broadband take-up because people are waiting for costs to fall.

Increased take-up can help drive down costs, so the UK is in a Catch 22 situation that only very competitive offers from providers such as BT and Virgin Media could hope to change.

Just 0.2 per cent of UK homes had superfast broadband at the end of 2009, according to Ofcom's International Communications Market Report 2010 (PDF) published in December.