It is an annual tradition at Renesys to provide a year-end review of how the Internet providers at the top of our Market Intelligence global AS rankings fared over the previous year. The Internet remains a huge blind spot for many organizations that are buying Internet access. Market Intelligence provides the insight into who the leaders in the Internet transit marketplace are today and how they have changed over time. Back in 2008, we chose to look at the 13 providers that spent at least some time in the Top Ten that year,hence the name “Baker’s Dozen“. We looked at the top players again in 2009, 2010 and 2011. A lot has changed over the years and for 2012, we welcome two new members to this exclusive club,PCCW and XO. As predicted last year, we also say good-bye to a declining AT&T and Savvis. While AT&T’s departure from the top of the global stage may be surprising to some, Savvis really hasn’t left as it is now part of CenturyLink, which also owns Qwest. And while Qwest did leave our top global rankings in 2011, they have now returned as part of a reinvigorated CenturyLink.
As you read this blog, keep in mind that all of the rankings we discuss are relative to IPv4, the Internet protocol carrying over 99% of all Internet traffic. (For example, compare total traffic to IPv6 traffic at the very busy Amsterdam Internet Exchange.) While we did also review IPv6 rankings last year, so little has changed that we’ll just refer you to that blog or, for more current information, our Market Intelligence product offering which covers both IPv4 and IPv6 in detail. So let’s dive in and highlight a few of the trends and changes we observed in 2012.
And the Winners are …
This graph shows our global scores for the Baker’s Dozen over the past year. As always, the absolute scores are not meaningful in this context, so we omit the scale. Five years ago, at the beginning of 2008, the top five in our rankings were Sprint, Level 3, Verizon, NTT and Global Crossing, in that order. Sprint has been steadily declining ever since and, as 2013 begins, was just surpassed by Tata, leaving it at 7th globally. Level 3 has acquired number-2 Global Crossing to become the undisputed number 1, and NTT and TeliaSonera are in a tight race for number 2. Verizon has dropped to 8th overall. In other words, the deck has been thoroughly reshuffled in a few short years. To make sense of the tangled graph above, we’ll divide up the players into three tiers and zoom in on each.
On Top of the World …
Level 3 (AS 3356) completed their acquisition of Global Crossing (AS 3549) in October of 2011. We show them as separate entities here, since their networks have not yet been merged. In previous acquisitions, Level 3 has quickly absorbed the other organization. Thus we expected to see the old Global Crossing AS fall off dramatically in 2012, while the Level 3 AS soared. That was not the case. Instead, both entities declined steadily in the first half of the year before leveling out. The decline is best explained by several small changes, rather than any one large customer loss. Perhaps the market is adjusting to the merger by buying other transit in an attempt to preserve diversity? A wide range of customers reduced the number of networks that they had previously routed via Level 3, such as North America’s nLayer (AS 25973, and recently acquired by Global Telecom & Technology, Inc. (GTT)), Japan’s Softbank (AS 4725), Britain’s Easynet Global Services (AS 4589) and Brazil’s Embratel (AS 4230). But one of the more significant reductions was due to a drop-off by Cable and Wireless Worldwide (AS 1273), starting in the spring of 2012.
Despite these losses, the combined North American-based Level 3/Global Crossing score is still more than twice that of its nearest competitors, East Asian carrier NTT (AS 2914) and Eurasian carrier TeliaSonera (AS 1299), both of which have vied for the number-2 spot throughout the year. But with Level 3 declining or at best stagnating, the competition is gaining ground as the Internet continues to expand. When we first reported on the proposed Level 3/Global Crossing merger in April of 2011, we stated that the next five global providers would have to combine to rival the score of new mega-Level 3. Now, “only” the next three would have to do so, namely, NTT, TeliaSonera and Inteliquent. It will be interesting to see if this trend continues in 2013.
But absent dramatic consolidation, it’s safe to say the global race is now for the number-2 position. While TeliaSonera was briefly ahead of NTT at the end of the summer, NTT has more recently reasserted itself and appears to be gaining on its nearest competitor. NTT saw increases in transit from Japan’s KDDI (AS 2516), South Korea’s LG DACOM (AS 3786) and a surging China Mobile (AS 58453) to name just a few. TeliaSonera saw dramatic increases in transit from SingTel (AS 7473). Clearly Asia, with most of the world’s population and still relatively low Internet penetration, will remain a key battleground for years to come. This is a region of the world where we rank Level 3 second as AS 3356 and fifth as AS 3549.
Closest Thing to Heaven …
After leaving the rarefied air of the top three providers, we encounter our next group of five very strong global carriers. Here we see Inteliquent (AS 3257), formerly Neutral Tandem and Tinet, Cogent (AS 174) and Tata (AS 6453) keeping up with the overall growth of the Internet. Sprint (AS 1239), which was about to be passed by TeliaSonera at last year this time, has now just been passed by Tata. If they continue on this trajectory, Sprint may end up in our third group by next year. Finally, Verizon (AS 701) saw an interesting jump at the end of year to get within striking distance of Tata.
So where were the big wins? In Asia, of course. The main contributor to Inteliquent’s rise was a substantial increase in transit from the 16th-ranked Asian carrier, Flag (AS 15412). Cogent’s largest gains came from Korea Telecom (AS 4766), while Tata’s came from Russia’s Vimpelcom (AS 3216), Vietnam’s VNPT Corporation (AS 45898), Bharti Airtel (AS 9498) and a number of smaller players. Even Verizon got into the act with a year-end surge largely due to increased transit from China Telecom (AS 4134). Now China Telecom roughly equally splits its transit needs between Verizon and Sprint. Without this single enormous customer, these two US-based carriers would tumble into our third group, shown next.
The Rest of the Best …
This brings us to the final five of our Baker’s Dozen, namely, Telecom Italia Sparkle (AS 6762), PCCW (AS 3491), China Telecom (AS 4134), XO (AS 2828) and CenturyLink (AS 209). CenturyLink acquired both Qwest and Savvis in 2011. PCCW entered our Baker’s Dozen for the first time this year after solid and consistent gains throughout 2011 and 2012. XO, after a strong 2011, ended up treading water in 2012, but still made the cut for the first time, thanks to the departure of AT&T and Savvis. Both Sparkle and CenturyLink stumbled a bit later in the year, which kept CenturyLink from passing XO and put PCCW within striking distance of Sparkle.
Again, we are seeing the influence of Asia within movement in this third group. Sparkle’s biggest increases came from India’s Bharti Airtel and Russia’s Vimpelcom. The decreases later in the year are predominantly due to losing transit from Russia’s Rostelecom (AS 12389) and losing Russia’s MegaFon (AS 31133) as a customer entirely. Meanwhile, PCCW gained significantly from China Mobile’s increased transit. The one exception to Asian influence in our rankings concerns CenturyLink, whose rise was dominated by increased transit from GTT/nLayer.
Westerners view the Internet as a commodity and ubiquitous access is taken for granted. Unsurprisingly, we continue to see a wave of consolidation in these markets as companies can only “grow” by acquisition. Organic growth can now only come in underserved markets, and today we see the battle for global Internet dominance playing out in Asia. Tomorrow, as its physical infrastructure improves, we may see more attention shift to Africa. Although Asia continues to be the growth engine for many of the Baker’s Dozen NSPs, we are starting to see commoditization and market consolidation on its western edge. During the year a number of Russian NSPs successfully integrated their 2011 acquisitions and are now looking for a compelling competitive advantage in a tight IP transit market.
But, nearly everywhere you look, enterprises have a lot more good choices for Internet transit than they have in years past. That means that they are becoming more sophisticated consumers of Internet transit, which is why we find ourselves spending more time in 2013 studying Internet path performance, in addition to the providers’ relative market share. Enterprises are starting to managing the Internet as part of their overall networking strategy and demanding explanations for poor performance from their providers. Any provider who can serve an increasingly interconnected world, and do so reliably with low latencies in good times and bad, will undoubtedly gain customers and grow in our rankings. Stay tuned.