There’s been a lot of talk lately about the growth of the Internet. Two particular events, as far as I’m aware, have encouraged this. One of these was an announcement by Cogent that they were lowering prices. The other was the release of a Cisco whitepaper on global IP traffic growth.

Cogent has always been the low-price alternative for Internet transit. In their own words, from the Telphony Online article:

“The price differential between ourselves and our two active competitors has shrunk to 2.5 to 1 as opposed to 30 to 1,” Schaeffer said.

Given their announcement of $4 - $7/Mbps, that puts their estimated competition around $10 - $17.5/Mbps. That sounds about right for the “wholesale” market (Tier 2 ISPs, high-bandwidth web properties, etc) and high-capacity retail.

But the part of the article that’s most interesting to me is the quote:

“We have seen Internet traffic growth slow over the past year as measured by a couple of references,” Schaeffer said. “The rate of growth in percentage terms has slowed and that is because of a number of factors.

The key phrase here is “in percentage terms”, which is echoed in the Cisco whitepaper. For instance, here are some graphs that I threw together while trying to understand the data:

In absolute terms, traffic will continue to grow at an impressive scale.

But in relative terms, Cisco predicts that it will start slowing across the board.

Cisco goes on to produce more interesting (and prettier) graphs in their companion whitepaper Approaching the Zettabyte Era. But the point appears to be, as Cogent’s Schaeffer described, the rate of traffic growth is slowing. (I wonder what the MINTS data will look like in a couple years’ time…)

Which leads me to wonder what will happen to prices. They’ve been dropping while overall traffic growth has been rising. But some have suggested that prices are stabilizing. (recently including Ike Elliott) Could this be a reflection of growth rates slowing? Or of relative costs rising? Or of something else entirely which remains difficult to track? (like transit costs versus the cost of peering, as suggested at by Rob Powell)

More importantly, what happens next? Consolidation in the service provider industry has reduced the availability of long-haul dark fiber. If prices stabilize, then the last men standing win. At least until the fiber in the ground needs to be augmented or replaced…