U.S. DS1 and DS3 network connectivity price trends

Publicly filed interstate rate detail from 1994 to 2009 for Ameritech, a large U.S. local telephone operating company, are now available in a more accessible and useful form.   These rate elements are for communications services in U.S. mid-western states:  Illinois, Indiana, Michigan, Ohio, and Wisconsin.

Based on simple price indices, Ameritech’s DS1 and DS3 prices appear to have fallen 2.8% per year and 4.6% per year, respectively, on an inflation-adjusted basis.  These price indices are fixed-weight indices for copper-based (electrical) connectivity purchased on a 60-month purchase commitment plan in zone 3 of Ameritech’s pricing zones.  The index includes the local distribution channel rate and the rates for interoffice channel mileage and for interoffice channel terminations.  I chose the fixed weights for these rates in light of the average revenue distribution across these elements.   The calculated DS1 price trend is similar to the 3.3% per year inflation-adjusted decrease in price for Bell Atlantic’s DS1 local distribution channel.[*]

Ameritech’s revenue distribution by zone has shifted toward more rural zones from 1993 to 2008.   From (demand years) 1993 to 1999, nearly half or more of Ameritech’s DS1’s revenue was from zone 3.  DS3 revenue during that period was somewhat more evenly distributed, but by 1999 about 50% of DS3 revenue was from zone 3.  Ameritech’s 2001 filing (demand year 2000) increased the number of pricing zones from 3 to 5.  Roughly half of DS1 and DS3 revenue was shifted to zones 4 and 5.  Higher number zones have more channel miles per channel termination, i.e. higher numbered zones are more rural. Higher numbered zones also generally have higher DS1 and DS3 prices.

DS1s and DS3s elements purchased on a term plan are typically purchased on 5-year (60-month) purchase commitment plans.  Among Ameritech DS1 elements purchased on a multi-month term plan, more than 90% of DS1 revenue from 1993 to 2004 was for elements purchased on a 5-year term plan. That figure subsequently fell to 79% in 2008.  The corresponding share of DS3 revenue for elements purchased on a 5-year term plan was about 60% in 1993-1994 and about 80% in 1996-2008.  Purchase commitment plans that span multiple years create inertia in purchase prices.

* * * * *

Data: Online spreadsheet of Ameritech DS1 and DS3 price indices and related data (Excel version);  Online spreadsheet with summary statistics for Ameritech rate detail and also showing credit, miscellaneous, and revenue aggregate revenue elements (Excel version);  Relevant discussion of aggregate revenue elements in price caps;  Full dataset of Ameritech rate elements, quantities sold, and prices, 1994-2009;  Additional data on bandwidth price trends in the 1990s.

[*] DS1 and DS3 connectivity is often also called T1 (or T-1) and T3 (or T-3) connectivity.  The terms T1 and T3 tend to be used in retail purchases of private line circuits.  Ameritech distinguishes names for DS1 and DS3 connectivity by whether they are used for public switched voice transport.   Connectivity not used for public switched voice transport is named DS1 and DS3.  Connectivity used for public switch voice transport is named LT-1 and LT-3.  The price trends discussed above concern DS1 and DS3 connectivity not used for public switched voice transport.  These circuits are known as special access circuits.

Leave a Reply

Your email address will not be published. Required fields are marked *

Current month [email protected] day *