Leased Line Prices - Why They've Fallen Dramatically
Our free leased line prices tool has now returned over 60,000 quotes. One of the trends we've seen is that leased line prices keep on falling. Here are the reasons why...
Improvements In Optical Networking
Most of the cost of creating and operating fibre networks comes from having to dig up the road or pavement, lay fibre-optic cables in the ground, and endure years of losses while you acquire enough customers to pay the cost of maintaining and operating the network.
Once you've done all that, the cost of increasing the bandwidth is relatively minor, as you probably don't need to dig up the roads again, or replace the fibre-optic cables. You just need to replace the equipment on the ends of the fibre.
Cheaper End-User Equipment
When you buy a leased line, you don't just get a circuit. You are also loaned a router. That router connects, in due course, to a big scary router that can route many gigabits per second of data... from each of its ports!
These bits of equipment have become cheaper and more powerful, as advances in electronics enable the manufacturers to cram more processing power and memory onto the same amount of silicon, without cost increases. When combined with advances in optical networking, these changes let leased line providers offer bandwidth at lower cost, as network equipment is upgraded.
Back in 2001, the UK telecoms regulator OFTEL forced BT to offer its leased lines at wholesale rates to competing operators. The resulting competition caused leased line prices to fall.
Privatisation has also played a key role, encouraging BT to reduce its overmanning. In 1984, when it was privatised, BT employed 235,000 people. It now employs about 100,000 people, while providing more services than ever. Cable & Wireless was similarly forced to shape up, following its privatisation.
The dot-com boom saw leased line prices fall further, as new entrants such as Colt Telecom arrived, cutting prices in major cities.
Most carriers, including BT, Virgin Media, Cable & Wireless, Verizon and Colt decided to offer their services both directly via their in-house sales teams, and indirectly via resellers and partners. It is the resellers more than any that has driven down leased line prices by proactively and persistently marketing attractive deals to IT Managers.
Broadband Boom Has Funded Backhaul Investment
The booming demand for ADSL connections forced BT and the local loop unbundlers to invest heavily in 'backhaul' capacity, in other words to install high-capacity data circuits to link equipment housed in thousands of UK telephone exchanges to the provider's own network. Virgin Media also installed high-capacity links to cope with the demand it faced.
This investment in backhaul capacity created economies of scale that have helped bring down leased line prices.