T1 Prices Seen Stabilizing
by Debra Dyer, Staff Writer
May 16, 2006 - Steve White is a business owner in Los Angeles that depends on
a T1 line (24 bundled 56K channels) to run his small business. White recalls
the monthly cost of that T1 line was near $1000 when he originally ordered it
back in 2000. "Now, I pay just $550 for the same service" White adds.
Such is the general industry trend, according to Telarus, Inc., authors of
GeoQuote - the real-time T1 price comparison engine. "We've seen dramatic
price decreases from 2002 through 2005, primarily as a result of the glut
of capacity left over from the boom days of 2000" noted Adam Edwards, president
and CEO of Telarus. "However, recently we have seen prices firm up as
network capacity begins to fill."
During the Internet boom days of the late 90's, carriers were involved in a mad
dash to build network capacity. Many financed these massive build outs and
later succumbed to the massive debts incurred. This implosion lead to a
huge glut of capacity that was being acquired by the more stable Internet service
providers for pennies on the dollar.
Due to this increase in capacity carriers engaged in a price war, slashing costs in
order to attract new customers to their network. This price deflation continued
from 2000 through 2005, further increasing demand for reliable T1 service.
"You can now buy a T1 line for under $300/month, which is not much more than
a business-class DSL line, which tends to be much more unstable" commented Edwards.
"These new low prices have attracted many new customers and also prompted larger
businesses to add more lines, further removing excess capacity."
Industry consolidation has also lead to the stabilization of T1 prices. Carriers
have been joining forces at a record pace. Some examples of the recent trend are:
MegaPath/Netifice, New Edge Networks/Earthlink, XO/Allegiance, Focal/Broadwing,
AT&T/SBC/BellSouth, TelePacific/MPower, and Verizon/MCI. Further consolidation is
expected as the industry shores up its business and more importantly, returns
the telecom sector to profitability.
As time goes on, expect to see prices for dedicated services stay the same, but
expect to see an increase in features and services that the T1 lines can handle.
Specifically keep an eye out for MPLS-encrypted virtual private networks,
VoIP, video conferencing, and other cutting edge innovations that will give
us all a reason to buy a T1 line.
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