The global recession has had no impact on international Internet bandwidth demand, according to TeleGeography strategy vice president Stephan Beckert. Speaking to Pacific Telecommunications Council attendees in Honolulu, he said international Internet bandwidth was showing no signs of strain with plenty of unlit capacity to take up the slack.

Nevertheless, international capacity was likely to be maxed out within four years at current growth rates. Bandwidth demand has topped 60% for the past three years, requiring capacity to double every 18 months. The trend forced suppliers to add more capacity last year than was operational in 2007.

But operators enjoy a healthy buffer. TeleGeography estimates just 13Tbps of the 53Tbps of potential transatlantic capacity has been lit, with just 10Tbps of that sold onward to customers. And just 4.6Tbps of that lit capacity is actually in use. Beckert said the Internet accounted for 77.3% of that bandwidth.

Video continues to be a prime driver for bandwidth, although P2P is now believed to account for just a fifth of Internet traffic thanks to the rise of legitimate Web venues such as Hulu. TeleGeography believes much of this consumption has shifted to HTTP services, which now comprise 41% of total Internet traffic. Streaming services represent 8% of Internet usage.

Beckert said capacity prices had collapsed by a weighted average of 70% over the past decade and were likely to continue the downward trend. “Prices really only go in one direction, and that’s down.” That performance would have been even worse were it not for tremendous growth in mobile termination. Average traffic growth of 12% to 16% annually over the past few years has also mitigated against further price declines. But this growth was not necessarily good news for operators as the number of competitors had skyrocketed in recent years. The result is a market that barely outpaces inflation, Beckert said. “The trend, at least right now, is not our friend.”

New cables are coming online at rates “comparable to the peak of the boom” at the turn of the century, Beckert said. The industry added 14 cables last year and 15 the year before. It’s expected to see another 13 come online by December. And pricing isn’t helped by largely flat utilization rates caused by local access bandwidth outpacing new subscriptions.

But capacity providers can take heart in cratering costs. Investment is now around a fifth of 2001 bubble levels, thanks in part to shorter cables and a preference for single-span systems instead of costlier rings. Beckert said actual costs had also declined, meaning operators were unlikely to run into the disastrous financial challenges that characterized the last boom. “Every operator we’ve surveyed is adding capacity to their networks,” he said.

Beckert said the 2014 deadline for capacity was based on current technologies and reminded the audience wavelength compression techniques had doubled transatlantic bandwidth over the last five years. “There is a vast amount of capacity that can be wrung out of these networks,” he predicted.

VoIP REVOLUTION: Switched voice accounted for just 0.3% of used international bandwidth last year, and the segment is quickly falling to VoIP for international calls. Beckert cautioned even a modest market penetration would affect the fixed market, claiming German prices have fallen despite VoIP claiming just a 20% share of the customer base. TeleGeography believes VoIP now accounts for more than half the international voice traffic originating in France.

Skype remains the sole VoIP juggernaut, responsible for 54 billion of the 406 billion total international voice minutes used last year. “By our estimates, just under half of Skype’s traffic is cross-border,” Beckert said, adding he knew Skype hit a tipping point when his grandmother started using it. He said Skype was cannibalizing PSTN traffic at least in part and speculated international PSTN growth rates would be around 12% annually if Skype was a traditional carrier.

Beckert said the data showed voice was leaving the PSTN and would likely increasingly be used as a loss leader for other services. He predicted mobile operators would increasingly focus on ILD and said iBasis’ recent acquisition by KPN was a sign of things to come. “It’s not easy to get rich in the international voice market anymore.”

Total voice traffic grew 8% in aggregate last year, signaling a slowdown that shows no sign of ending. Beckert blamed the global recession and said the US housing bust had decimated traffic into Latin America. The segment surged 35% in 2005 but suffered a rare contraction last year as immigrant laborers returned home after US construction work dried up. “For some destinations in Latin America, traffic has fallen by 20%,” he warned. Operators carried a collective 405 billion minutes of voice last year.

The wholesale market is now growing faster than retail, although revenue growth is down. “A bit of a bright spot,” Beckert told attendees, noting the African segment doubled between 2004 and 2008. But carriers have been impacted by regulatory shaping in some markets, with European minutes down 1.5 billion thanks to EU interference in mobile termination and other issues.

Mobiles now account for about half of all terminated traffic, thanks in part to fixed mobile substitution and the propensity of subscribers in emerging markets to bypass fixed services altogether. “A lot of mobile operators in developing countries have paid much more attention to the international market,” Beckert observed. “If you’re a mobile subscriber in Kenya, you’ll find that Safaricom’s international calling rates are much cheaper than fixed-line calling rates from Telkom Kenya.”