Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Convergence Between Asia and Europe Presentation to March 2015

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | What is convergence? Convergence can mean different things…

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | What is Convergence? For today’s presentation, convergence means moving toward a unified number Are wavelength and IP transit prices in Asia approaching (and equaling) the prices in Europe? Is Asian international Internet bandwidth approaching (and equaling) European levels?

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | What Could Cause Price Differences? Competition (or lack thereof). Supply – Are there lots of cables on the route? Distance – Longer cables require more fiber, repeaters, and power. –Less of a factor than at first glance, since the price of capacity is based on incremental costs, not construction costs. Network Configuration –Express fibers, multiple cable segments, etc.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | On to Convergence! Two ways to look at this: –Capacity – is Asian capacity growing fast enough to approach European levels, even as European capacity continues to rise? –Pricing – Are prices in Asia declining enough to match the prices in Europe, even as prices in Europe continue to decline?

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Looking at Capacity The Global Internet in 2004

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Looking at Capacity The Global Internet in 2014

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | International Capacity in Asia and Europe Internet Bandwidth, Five Year Annualized Growth (CAGR)

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Capacity in Asia and Europe Internet Bandwidth as a multiple compared to Germany

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | So not today, but what about the future? Predicted CAGR for Used International Bandwidth from : –Asia: 40% –Europe: 36% So, Asia is predicted to grow at a faster clip, but convergence will take a while. –TeleGeography forecasts that Europe will still have 2.9x the bandwidth of Asia in 2021.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Let’s Look at Pricing Convergence

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Are Prices Converging? Prices worldwide have been going down Trans-Atlantic capacity has historically been much cheaper than Trans-Pacific Same with IP Transit prices in Europe versus Asia So, with this in mind, are prices declining at different rates? Are we moving towards a unified price between the two?

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | What Prices We Will Look At Let’s look at some representative routes for some 10 G wavelengths: –For Europe: London-New York –Trans-Atlantic route. London-Amsterdam –Intra-European route. –For Asia Singapore-Tokyo - Intra-Asia route. Los Angeles-Tokyo – Trans-Pacific route. Each of these routes are large and competitive, so we see (sometimes extreme) downward price pressure.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Convergence in Transport Pricing Median Monthly Prices, 10 Gbps Wavelengths

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Convergence in Transport Pricing 10 Gbps Wavelength Price Multiple over London-New York

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Looking at IP Transit Pricing Prices falling everywhere! But are they converging?

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | IPT Prices aren’t converging Unlike transport, IPT price multiples over Frankfurt have remained relatively constant.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Why aren’t IPT Prices Converging? Wait? Wavelength prices are converging, but IP Transit prices aren't? Why is that? 1. They are very different products. 2. Different sellers in either market. 3. Backhaul and cross connects can be an expensive pain.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Convergence of pricing Good news (for some)! –Asia is getting cheaper compared to Europe. –Depending on who you are, this is a bad thing (sellers) or a good thing (buyers). What about the future? –Prices will continue to decline, but a single unified price is not going to happen anytime soon.

Carlsbad, CA | Washington, DC | Exeter, UK | Singapore | | Cody Williams (Washington D.C. Office) C: