As our regular readers know, Renesys computes daily rankings of all the service providers in the world: globally, by geography, and by market segment. The rankings are a rather crude measure of size, as they are based entirely on the quantity of IP space ultimately transited by each provider. However, it's the ranking trends that are more revealing than any absolute number. Who is adding customers? Who is losing them or just standing still? All of the rankings and the reasons for any changes are updated daily and available via our Market Intelligence offering. For the past couple of Decembers (2009, 2008), we've also provided a glimpse into some of this data via year-end blogs devoted to the top global providers. Halfway through 2010, we decided to revisit this topic and highlight some recent changes: the fall of Sprint and rise of Tinet being perhaps the most interesting.
The above graph plots global scores over time for the top 13 providers through the first half of 2010. Since the exact numeric score is not that meaningful in this context, we will not provide the scale in our graphs. Rather, we will show how the scores changed over time and consider some of the reasons behind these changes. To add clarity to the trends and changes, we'll enlarge the scale of the graph and break this group of thirteen into three distinct clusters, namely, the top three, the middle six, and the final four. In these expanded graphs, the changes will be more obvious and we'll make note of some of the more interesting ones.
In 2006, when Renesys first started ranking providers, Sprint (AS 1239) had a commanding lead with a global score of almost 25% more than second-place Level 3 (AS 3356). In 2009, Level 3 pulled away from a largely stagnant Sprint, opening up a roughly 12% lead. Now in mid-2010, Sprint is almost 40% below Level 3 and has just been passed by Global Crossing. Sprint's precipitous decline was largely the result of losing Tinet (AS 3257) as a customer. We now see Tinet as transit-free — a status sometimes confused with the much misused "Tier-1" designation. As a result, Sprint lost credit in our ranking system for all of Tinet's downstream customers, a substantial loss as Tinet is currently ranked 10th in the world.
More recently, Sprint also lost Russian provider EDN Sovintel (AS 3216), who is now favoring Global Crossing (AS 3549), Verizon (AS 702) and Cable and Wireless (AS 1273) for transit. Sovintel, a top-20 European provider in our rankings, was acquired by Vimpelcom (Beeline) in 2008 and owns the Golden Telecom trademark. One possible explanation for these Sprint losses is the continued decline in Internet transit pricing. Every provider has their own internal costs for providing access to their network. If Sprint's costs exceed or even approach current marketing pricing, they might simply have made the rational business decision to stop competing in an activity with limited potential return. Sprint's own web pages suggest a decreased emphasis on IP transit, as their current offerings are buried several levels below their mobile services-oriented main page.
Our next group is decidedly more mixed. Verizon's (AS 701) big increase resulted from temporarily picking up transit from Tinet, only to quickly lose it. Otherwise, NTT (AS 2914), Savvis (AS 3561), Telia (AS 1299) and Verizon remained relatively flat during the first half of 2010. In contrast, Tata (AS 6453) and AT&T (AS 7018) continue to chalk up customer wins and trade places in our rankings. Overall, the six providers in the group appear to be converging to roughly the same level and it might be another year or so before a clear winner or winners emerge.
In our final group, Tinet has been on an absolute tear in 2010 with wide-ranging customer wins including India's Bharti (AS 9498), Europe's LambdaNet (AS 13237), Venezuela's CANTV (AS 8048), Vietnam's Saigon Postel Corporation (AS 7602) and many others. As a result, Tinet has secured the number 10 position in our global rankings, after an early surge by China Telecom (AS 4134) briefly vaulted the Chinese into the top 10. In addition, if Tinet can continue at this pace, they could easily find themselves in the middle of the second grouping by year end, as they currently sit at only 6% below AT&T.
Conclusions
Internet transit is an extremely
tough business,
one with ever falling profit margins.
With lower Internet penetration, fewer competitors and higher margins,
the Middle East and Asia have provided somewhat of a refuge for providers who can operate effectively in these geographies.
As a result,
you can expect many traditional US-centric carriers,
such as AT&T, Sprint and Verizon,
to either grow very slowly or decline,
while those with strong global diversity, such as Level 3, Global Crossing, Tinet and Tata,
should continue expand proportionally to the markets they serve.
And if older, less nimble players "leave the field",
such departures might just relieve some of the extreme pricing pressure found in the industry today,
allowing the rest of us to continue to enjoy all that great Internet
"content",
but at slightly higher (and more sustainable) pricing levels.
Curious as to why AT&T has been picking up a head of steam lately. Could their growth be simply organic (iPhones and U-Verse customers...AT&T Mobility rides right on AS7018 and both ATTIS and BellSouth ASes pass a significant amount of traffic right to 7018) or are they getting some contracts from smaller ISPs that I'm overlooking? Or are their current ISP contracts (I know of one provider near me who is offering 40 Mbps FTTH and is single-homed to AT&T for example) growing organically along with AT&T's own portfolio and getting upward momentum that way?
As for Sprint, it looks like they're just going to use their backbone for 3G/4G service at this point, plus any providers who want to keep paying the company a premium to get access to the network. Clearwire actually tends *not* to use Sprint for their own branded WiMAX service, which is rather interesting since the company is owned 51% by Sprint these days.
While I'm on the topic of mobile networks, did you know that Verizon Wireless doesn't exclusively use AS701 (or Verizon-GNI, the DSL/FiOS side of things) to pump 3G bits? Over the course of my most recent vacation I apparently crossed three different Verizon Wireless gateway areasone (Baton Rouge, LA) did indeed use AS701, but the other two (Dallas and Miami) appear to be single-homed to tw Telecom and AT&T, respectively.