New data from TeleGeography’s Enterprise Network Pricing Service reveals falling IP VPN prices around the world. Median prices for 10 Mbps IP VPN ports were significantly lower in Quarter 1 2014 in Singapore, Sydney, and Sao Paulo and slightly lower in London and New York than they were in Quarter 1 2013.

According to TeleGeography, just 8 percent of global IP VPN sales are for ports at capacities below T-1/E-1 while demand for 2Mbps to 10Mbps ports soared (representing 51 percent of all MPLS VPN ports sold).

Demand for larger ports is high, yet the competition remains fierce. In fact, carriers have been slashing their prices in order to gain market share. TeleGeography says that the average decrease in median 10Mbps port prices in major cities was 18 percent.

VPN Performance

TeleGeography analyst Brianna Boudreau explained that, “As end-user capacity requirements increase and the underlying cost of transport decreases, carriers will continue to adjust prices. Further price erosion for IP VPN services, particularly at higher capacities, can be expected.”

These lower pricing tiers are a byproduct of sky-rocketing demand as enterprise bandwidth needs grow exponentially. For example, many enterprises have moved to cloud-based services and SaaS solutions. This move instantly increases their need for bandwidth as all users must connect to the cloud in order to access their software and documents. What’s more, the popularity of mobile devices such as smartphones and tablets mean that more employees are accessing corporate WANs remotely.

Another driver involves branch offices located around the world. For example, according to Aryaka, “Enterprises can usually get good networking results within a geography like North America or Western Europe when using IP VPNs. But they usually don’t deliver the same results for traffic that has to cross an ocean – say, to China, India, or Brazil – over the public Internet, with latencies not only high but highly variable, and packet loss rates that are far greater than with regional connections. The result can be degraded performance to the point that many applications are practically unusable.”

Thus, demand for higher capacity network solutions is on the rise. But is investing in bigger ports the solution, despite the falling prices? While falling prices are certainly enticing, does performance improve?

Adding a bigger pipe to a system that doesn’t necessarily perform well to start with isn’t the answer. A better approach is to bypass sluggish public networks and use a “dedicated private core network based on globally distributed POPs.” Companies such as Aryaka Networks have developed solutions to the issues enterprise organization face as their bandwidth needs increase. With Aryaka’s WAN-Optimization-as-a-Service solution, you can enjoy huge WAN performance improvements without the expense or wait times associated with IP VPNs. This solution includes a fully managed, private WAN as part of the package, superior performance across distances, end-to-end WAN and application visibility, and high performance, reliable access to cloud services and SaaS. Unlike IP VPN, there’s zero capital expense and a low total cost of ownership. Best of all, you can get started in minutes rather than months.

Sources:

1. Telegeography, “IP VPN Prices Fall as Customers Demand More Capacity,”

2. Aryaka, “Top 7 Reasons to Choose Aryaka for IP VPNs,”