Today Earl Zmijewski at Renesys posted a fantastic article about the trends in IP backbone rankings this year. Looking at the top 13 networks, he discusses the trends and events behind the changes in rankings over the course of 2008. He quite properly notes that the raw ranking itself is not that meaningful, it’s not something we can translate into profitability or revenue growth. But the relative movement does tell us things of interest. For his full analysis, I recommend a read of the article. I will summarize the bits I found most interesting.
Global Crossing’s rise: All year we have seen glbc‘s financial results improving, with steady revenue growth and an increasing confidence emanating from the company itself. That trend is clearly evident in the Renesys ranking of its IP backbone, which is now solidly ranked #3 in the world by Renesys and is still rising very steadily. It lends some credibility to the company’s resurgence, and credibility is something they don’t have in great supply given their colorful history from the telecom nuclear winter.
The declines of Verizon and NTT: These do not have to do with revenue or success in the marketplace, they have to do with peering. Both Verizon (NYSE:VZ, news, filings) and NTT Communications (NYSE:NTT, news, filings) lost out big in the rankings because some of their transit customers either became Tier 1 or took another step in that direction. These changes seem to be symptomatic of a growing Tier-1 backbone club, it’s not as exclusive as it once was and there are quite a few more knocking at the door. I think that we will continue to see more of this as people care less about IP transit as a revenue source, and more about content distribution and last mile access.
Level 3 and Sprint’s hollow game of leapfrog: As of now, Level 3 Communications (NYSE:LVLT, news, filings) claims the top spot on the back of extra traffic from Asian sources, but the situation is clearly volatile. Both Level 3 and Sprint Nextel (NYSE:S, news, filings) continue to show strength in their IP backbone rankings that belies their power in the marketplace. Of all the companies discussed, it is these two who have publicly struggled the most this year. IP backbone rankings do not translate directly into operational success, but eventually the operational and financial trends do win out. If Sprint and Level 3 don’t get their act together soon, will we see Global Crossing challenge their dominance in 2009?
The wind from Asia: Asian traffic has been the biggest driver in all the rankings this year, and that’s another trend that isn’t going to stop. The appearance of China Telecom on these charts isn’t going to go away either. One can’t ignore the rising importance of traffic from this region, the breeze is going to get stiffer every year.
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Categories: Internet Backbones · Internet Traffic
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I analyzed GLBC Q3 #s quite closely & come to a different conclusion about their future . I have not kept my notes but will give you my recall .
The bulk of the revenue growth came in their ROW [rest of world] division which does between 1.1-1.5 bil . However, the growth in that division was about 1 mil in ebitda & totaled 7 mil for the qtr . I believe that division provides something on the order of 25 mil in ebitda PER YEAR .
The GCUK had flat rev & flat ebitda approximating 40 mil .
Impsat [their south american acquisition[ grew rev about 6 mil & grew ebitda about 10 mil to around the 40 mil area . This new division is their strength, however, it appears that most of the ebitda coming from this division is from cost cutting . How much cost cutting remains is unknown to me .
All in all not a great story . The #s are very deceptive !!!!——I think the co will be sold & is currently available .
Morty