While the amount of traffic on the Internet continues to grow, the number of networks carrying that traffic is shrinking, according to the results of a two year study on Internet traffic trends by Arbor Networks.

The Internet Observatory Report, compiled by Arbor Networks with the help of the University of Michigan’s College of Engineering and Merit Network, monitored a total of more than 256 exabytes of Internet traffic – including a massive 12Tbps at its peak – over a two year period. From the analysis of detailed traffic statistics from 110 large and geographically diverse cable operators, international transit backbones, regional networks and content providers, the report found that more content is now consolidating inside a much smaller group of networks.

According to the findings, some 15,000 networks carried about 50% of Internet traffic two years ago. Today, about 100 networks carry 60% of the overall online traffic. “Five years ago, Internet traffic was proportionally distributed across tens of thousands of enterprise managed web sites and servers around the world. Today, most content has increasingly migrated to a small number of very large hosting, cloud and content providers,” the report said. “Out of the 40,000 routed end sites in the Internet, 30 large companies – ‘hyper giants’ like Lime- light, Facebook, Google, Microsoft, and YouTube – now generate and consume a disproportionate 30% of all Internet traffic.”

Google is now the largest traffic driver, accounting for 6% of total Internet traffic, the report noted.

CDNS AND HOSTING: This consolidation of traffic into a smaller base of networks reflects a couple of key trends on the Internet. One the one hand, content distribution networks are now attracting more traffic from content creates. On the other, the rise of large hosting providers is aggregating traffic into massive pools.

In the CDN space, Akamai, BitGravity, Highwinds and Gravity joins Limelight as major contributors of Internet traffic. In the hosting space, lesser known firms such as Carpathia Hosting, the operator of MegaUpload, MegaClick and MegaVideo content hosting sites, have joined the likes of Google and Microsoft in generating massive amounts of traffic.

One result of the transition of traffic to hosting and CDNs is that the traditional transit players, namely big telcos, are getting bypass by direct interconnections.

“Over the last five years, Internet traffic has migrated away from the traditional Internet core of 10 to 12 Tier-1 international transit providers. Today, the majority of Internet traffic by volume flows directly between large content providers, datacentre/CDNs and consumer networks,” the report said.

WHOLESALE TRANSIT DECLINE: The result is the collapse of the wholesale IP transit and the rise of advertising driven services. According to the report’s analysis, the cost of transit has declined from US$120/Mbps in 2003, to US$12/Mbps now and is projected to reach US$1.20/Mbps by 2014.

“Over the last five years, macroeconomic forces have radically transformed the global Internet commercial ecosystem. Economic changes, including the collapse of wholesale IP transit and the dramatic growth in advertisement-supported service, reversed decade-old business dynamics between transit providers, consumer networks and content providers,” the report said. “A wave of innovation is ongoing, with service providers now offering everything from triple play services to managed security services, VPNs and increasingly, CDNs. This change in the Internet business ecosystem has significant ongoing implications for backbone engineering, design of Internet scale applications and research.”

WEB VIDEO: In addition to the shift of traffic away from traditional telco networks, the report also found a shift in the types of traffic itself. While P2P traffic dominated Internet traffic volumes in the past, video has now pushed Web-based HTTP traffic higher. The report found that 52% of all Internet traffic now uses the HTTP protocol, up from 42% just two years earlier. Of the total HTTP web traffic, between 25% to 40% is video, reflecting the growing popularity of streaming video content over the Web.

“Historically, Internet applications communicated across a panoply of application specific protocols and communication stacks. Today, the majority of Internet application traffic has migrated to an increasingly small number of web and video protocols, including video over web and Adobe Flash. Other mechanisms for video and application distribution like P2P (peer-to-peer) have declined dramatically in the last two years,” Arbor Networks said.