May 17, 2005

Streaming video, streaming music and VoIP (voice over IP) are some of the many factors boosting demand for Internet bandwidth.

About 5 or 6 years ago, largely optimistic expectations of growth drove huge broadband investment. Then came the glut and the overcapacity and fears of a bandwidth 'meltdown'.

Today, demand for Internet bandwidth is largely on the increase again.

TeleGeography reports that international demand for bandwidth grew 42% in 2004. Last year marked the second consecutive year of growth, with carriers adding 62% more capacity in 2003.

"After a brutal five-year downturn, the international bandwidth market is showing renewed signs of life," said TeleGeography. "Demand for long-haul capacity grew briskly in 2004, and circuit prices, while not exactly stable, have been declining at a more moderate pace in many regions of the world."

Data traffic hasn't grown as rapidly as some analysts forecast in the 1990s, TeleGeography said, but companies' appetite for bandwidth "has been immense by any other standard."

What about the once feared bandwidth glut? "Even relatively modest growth in demand will soon deplete the current inventory of unsold circuits on many submarine cables and on some terrestrial network segments," TeleGeography said.

The appetite for bandwidth is being fed by consumers hungry for broadband services. According to a report just released by Point Topic, consumer spending on broadband is being driven by demand for streaming music and video, VoIP calling and other broadband value-added services (BVAS).

The research firm said that at the start of 2004 the annual rate of BVAS consumer spending was running at an annual rate of $3.3 billion worldwide, but by the end of the year the figure had more than doubled to $6.9 billion.

Obviously, that's good news for telecoms — and e-commerce companies and a wide range of content providers.

But Point Topic said the data was especially good news because the growth of revenues and users of BVAS outpaced even the rapid expansion of broadband adoption.

Source: eMarketer