The Mordor Intelligence report predicts that between 2018 and 2023, the managed MPLS market will grow at a compound annual growth rate of over 7%. Several factors affect MPLS pricing such as port speed and type, local loops, and international bandwidth fees. Overall, MPLS services are considered to be more expensive as compared to regular Internet access.
MPLS services are provisioned with varying port speeds and options for CoS.. Port speed, also referred to as bandwidth, is the capacity of MPLS circuit and is a significant factor in the price of a circuit. MPLS service providers require local carriers to provide the last-mile of the service. Each location may have a different local loop carrier and charges for the local loop can vary depending on the location. In addition, there’s often limited local loop competition, providing little incentive for carriers to reduce local loop charges. For international MPLS services, the contract may include a fee that reserves the bandwidth, while some carriers may bundle the fee into other charges.
How Much Does an MPLS Network Cost?
There is no consensus of the cost differentials between MPLS circuits in the US over Broadband. For connectivity at colo facilities, MPLS pricing over the last few years was generally similar to customer owned facilities, whereas Internet prices were less than $1/Mbps per month for large bandwidth amounts. And according to a report from TeleGeography, in Q4 2016, layer 3 MPLS 10 Mbps median prices ranged from $392/month in New York to $1,448 in Mumbai, compared to $2 - $10 per Mbps for broadband circuits. Therefore MPLS service can range in price significantly based on location, and cost significantly more than Broadband.
Requesting a price quote from a carrier is the only way to determine the bottom line cost for the services you require. Each carrier has different pricing based on discounts, number of locations, and contract commitments.
When comparing prices between MPLS providers, it won’t typically be an ‘apples to apples’ comparison since each carrier will have their own pricing model. It’s also important to realize each carrier’s ability to provide service within a geographic area. In some cases, they may need to coordinate with another carrier in order to provide service to all the requested locations in the quote. This can drive the price up even further. If a service provider’s reach is a concern, request details about Provider Edge (PE) coverage. The carrier’s PE infrastructure not only affects the MPLS pricing, but also impacts performance metrics such as latency and jitter.
There are four basic pricing models you can expect to see from various carriers:
Port and local loop pricing with no charge for CoS (Class of Service)
This model provides flexibility with CoS for no extra fee. All CoS and required bandwidth for each CoS level are included. Because this option is essentially ‘all inclusive’, it is generally more expensive than the others.
Port and local loop pricing with a pricing structure for each level of CoS
The pricing is based on the bandwidth allocated for each CoS. Therefore, the more bandwidth that is allocated to the higher priced CoS classes, the higher the monthly cost.
Port and local loop pricing with a single CoS price
This is similar to the first option but CoS is a fixed fee regardless of how bandwidth is allocated to the CoS classes.
Port and local loop pricing with best effort CoS at no charge, additional charge for additional CoS
Best Effort CoS is a Class of Service type intended to support general business transactions. If an additional CoS is needed - for voice and video for example - then there would be an additional monthly charge.
Once an MPLS service is activated with production data, migrating to a different carrier is difficult to do, which makes the initial decision phase critical and is a process that shouldn’t be rushed. Take the time to carefully evaluate carriers, pricing options, and network configuration options before making a final decision.