It’s become 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. In 2008, we chose to look at the 13 providers that spent time in the Top Ten in our rankings, hence the name “Baker’s Dozen“. We looked at the same group last year, although there were signs of impending turmoil. Can Level 3 maintain its hold on the top spot? Is Sprint still stumbling? Do Cogent and Qwest have what it takes to stay on the list? Find the answer to these questions and more in the 2010 edition of the Baker’s Dozen!
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. This year’s rankings showed some interesting changes, with Sprint, NTT and Tinet (formerly Tiscali) all finding themselves in new territory among the Top Ten. Level 3 stands alone now at the top of our rankings, and Cogent and Qwest find themselves being outpaced by the rest of the Baker’s Dozen. Later, we’ll also see some providers who may find themselves included in next year’s edition.
Before looking at where the Baker’s Dozen fall now in our rankings, let’s take a quick look at where they’ve been. When we started this feature in 2008, the market was largely focused on Internet transit and CDNs, and our rankings naturally favored strong players in these areas. Our original top 13 divided naturally into three clusters, with Sprint and Level 3 at the top; Global Crossing, Verizon, NTT, Savvis, AT&T and Tiscali (now Tinet, part of Neutral Tandem) in the middle; and TeliaSonera, Tata, China Telecom, Qwest, and Cogent rounding out the group. Over the course of 2008, TeliaSonera moved definitively from the bottom cluster to the middle, and Global Crossing had established itself midway between the top and middle clusters.
In 2009, streaming media began to gain influence with the likes YouTube and Netflix providing ever-increasing amounts of content. As this occurred, we saw Level 3, Sprint, and Global Crossing maintain their relative positions, although Sprint proved unable to match Level 3’s growth. We also saw Tata move up from the bottom to the middle cluster, with the gap between those two sets closing.
In 2010, the Internet started to turn into TV, as Netflix was reported to generate more than 20% of downstream traffic in the US during prime time. These market forces created new groupings in our rankings. Level 3 consolidated its hold on the top spot. Sprint saw a sharp drop in its score in 2010, and as a result finds itself at #3 behind Global Crossing and barely maintaining a slim lead over NTT, who has risen out of the pack to take the #4 spot from Savvis. Most of the remaining providers have consolidated into a tight cluster from spots 5 through 11. Cogent and Qwest both held steady throughout the year, but are now better associated with a handful of other NSPs than the higher ranked providers.
The Battle for Second Place
Level 3 (AS3356) is now the undisputed leader in our rankings. It held steady through much of the year, growing some late in the year after picking up TW Telecom (AS4323) as a customer. Its lead grew as a result of Sprint (AS1239) losing Tinet (AS3257) as a customer early in the spring. This loss dropped Sprint into a fight for second with Global Crossing (AS3549), a fight it would briefly win when Global Crossing suffered a small dip after losing some transit from Hurricane Electric (AS6939). It would be a short-lived victory, as Sprint lost Telecom Italia (AS6762) as a customer, and Global Crossing added Road Runner (AS7843) and Singapore Telecom (AS7473) as customers. As a result, Global Crossing held a secure lead over Sprint as the year ended, and Sprint would find itself barely holding the number 3 spot over NTT (AS2914), who surged after gaining increased transit from new and existing customers. NTT’s growth, in addition to nearly moving it into the number 3 spot, moved it comfortably ahead of its former neighbors in the middle cluster.
Cozy in the Middle
After Global Crossing, things get pretty tangled. As we already observed, NTT pulled nearly even with Sprint by year’s end. The relative rankings of the next 8 providers didn’t change too much. Savvis (AS3561) held steady during the year, retaining the number 5 spot behind NTT. TeliaSonera (AS1299) held on to number 6, although staying just ahead of the crowd after losing some transit from Hurricane Electric. Verizon started the year nearly tied with NTT, but despite a brief jump after gaining (then losing) Tinet as a customer, they lost some transit from China Telecom (AS4134) to end the year just ahead of AT&T (AS7018).
Tata (AS6453) and AT&T began the year neck and neck for the number 8 spot. Tata showed some slow, steady growth over the course of the year to wind up in a close race with TeliaSonera and Tinet for the 6 through 8 spots. AT&T saw its score flucutating quite a bit during the year, but although it ended the year higher than it began, it found itself in the number 10 spot, trailing not just Tata, but Verizon as well.
Tinet had another remarkable year. Starting off at number 10, it exhibited the same growth it showed in previous years, passing AT&T, Verizon, and Tata to pull into a virtual tie for the number 6 spot with TeliaSonera.
Focused almost exclusively on the enormous Chinese market (with some presence in South Korea, Vietnam and other locations), China Telecom started strong but couldn’t keep up with Tinet. It stayed close to AT&T until losing some transit from CNC Group, leaving it outside the Top Ten.
Turmoil at the Bottom
Only Cogent (AS174) and Qwest (AS209) remain in the original bottom cluster, as Tinet, Tata, and China Telecom grew to show more similarities with the middle cluster. To provide more context, we add to this graph five other NSPs — Telecom Italia, KDDI (AS2516), Deutsche Telecom (AS3320), XO Communications (AS2828), and Hurricane Electric (AS6939)—that appeared in the top 15 at some point during the year. While most of these providers showed consistent scores throughout 2010, both XO and Hurricane Electric made large jumps to make this a tighter group. It’s not yet clear if the gap between this group and China Telecom will continue to grow, or if next year’s Baker’s Dozen will feature some new faces.
The US old guard of AT&T, Sprint, Verizon and Qwest are treading water or declining. And as if to highlight that fact, Telecom Italia, Deutsche Telekom and France Telecom (AS5511) all became transit-free during the year. The first two gained peering from Sprint, while the latter acquired peering from Verizon. Transit-free networks are also sometimes called Tier 1, although that term is becoming less and less meaningful in the increasingly complex business relationships found on today’s Internet.
Internet transit is an increasingly tough business in developed markets as prices continue their downward spiral. The emerging markets of Africa, Asia and the Middle East with their relatively low Internet penetration and higher margins remain a bright spot, although they too are coming under pricing pressure in certain geographies. These markets still offer enormous potential, and providers willing and able to service them are growing and rising in our rankings. Those that do not service these areas are being left behind. We expect the transit-free cartel to continue its expansion as emerging markets gain influence.
In conclusion, those providers with a strong global footprint and a diverse set of offerings are continuing to rise in the rankings. And those organizations with popular content or captive end-users will find themselves increasingly in the driver’s seat when it comes to pricing negotiations. When it comes to the Internet, the only constant is change and we can expect more turmoil in 2011 as the market continues its rapid evolution. Stay tuned.