A price index for Verizon’s DS1 channel termination and channel mileage rate elements in New York State from 1993 to 2009 shows a 25% drop across those years. Adjusting for general price inflation using the GDP price index, that DS1 price decline is equivalent to an inflation-adjusted 4.0% decline per year from 1993 to 2009. That’s much less than the price-performance improvements associated with digital computing and storage. A rising price of communication relative to computing and storage makes distributed computing and distributed storage (cloud services) less economic.
The nominal DS1 price decline was quite uneven over time. Nominal prices did not change relative to the previous year from 1996 through 1999, and from 2005 through 2009. The years 1995 and 2000 had the largest nominal price index declines relative to the prior year. In contrast, the price index change was positive in both 1994 and 1999. Price-cap reforms occurred both in 1995 (Nynex waiver) and 2000 (CALLS plan). Thus price changes seem to have been associated with relevant regulatory changes.
DS1 price-cap revenue has shifted toward rural zones and longer purchase-term-commitment plans. The share of DS1 revenue in pricing zone 1 (most urban zone) fell from 69% in 1993 to 43% in 2008. DS1 revenue in pricing zone 3 (most rural zone) rose from 23% to 48% across that same period. At the same time, the average purchase term commitment associated with DS1 service rose from less than a year in 1992 to 6.4 years in 2008. More rural DS1 purchasers, who probably have fewer competing service providers, are locking into longer-term DS1 service contracts.
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Data: Online spreadsheet of NY DS1 trends (Excel version); publicly filed interstate rate detail from 1993 to 2009 for Verizon’s Nynex service area; coded extract of Verizon-Nynex New York DS1 channel termination and channel mileage rate elements; summary spreadsheet of Verizon’s Nynex rate detail (Excel version).
 Rates are for the historic Verizon-Nynex New York Telephone local telephone exchange operating company. In 2006, this operating entity served 89% of New York State incumbent wireline telephone lines. A somewhat different DS1 price index for Ameritech showed an inflation-adjusted 2.8% decline per year.
 DS1 revenue aggregates DS1 channel terminations and channel mileage elements. Looking at DS1 channel terminations demand (monthly units sold) shows a similar pattern.