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Crack the network cartel, analysts warn

The Internet backbone market could be monopolised by a "cosy cartel" unless the industry acts to ensure a free market, warned analysts from research firm Datamonitor.
Written by Jane Wakefield, Contributor

Currently, the ownership of the networks that make up the Internet is in the hands of a small number of providers, including MCI WorldCom, Sprint, Cable & Wireless and Internex. Datamonitor analyst Philip Codling commented: "There is a danger this small group of infrastructure owners will hold providers to ransom and keep prices up." As politicians wake up to the economic potential of the Internet, Codling believes government intervention -- albeit unwanted -- will be inevitable.

"Government is keen to see monopolies aren't created. If there is too much of a cosy cartel, bodies like the EU and the FCC (Federal Communications Commission) will step in to make sure the free market is upheld," he said. Such intervention, according to Codling, has always been "vehemently opposed" by the industry.

Datamonitor estimates the Internet backbone market will be worth £12 million in 2002. Markets outside the US will expand as the demand for bandwidth escalates. For the customer, an open backbone market will mean reduced costs for access and new technologies like IP voice and VPN's (Virtual Private Networks).

According to the survey, the cost of shunting data across the Internet is set for a dramatic fall. In 1998, the cost of transferring one terabyte of data across the public network was £48,000. Datamonitor predicts this could plummet to £182 by the year 2003 -- just 0.3 percent of the current cost.

Datamonitor analyst Andrew Ponsford explained: "The reason for this dramatic reduction in transfer costs is a bandwidth explosion driven by new technologies such as Dense Wave Division Multiplexing (DWDM). New market entrants and a general public IP network build-out will also force prices down," he said.

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