Sunday, March 12, 2006


Cost of Bandwidth

A great example of using maths to add credibility to an otherwise rubbish argument. In this case the point is that:

> The average IPTV user will likely consume about 224 gigabytes 
> per month ... at a monthly cost to carriers of $112

Namely, how are the poor ISPs and backbone providers going to cope? "I canny give her any more captain or she'll blow!"

The first clue is right there:

> Today’s average residential broadband user consumes about 2 gigbytes 
>of data per month, Kafka estimated, which costs the service provider about $1.

Rubbish. If I get a typical small to medium website hosting package I will probably be paying $1 per Gbyte. No question. But BellSouth is no small operation. Wholesale bandwidth charges are nowhere near that. If I was a big boy, I could get a Gbyte of bandwidth for closer to $0.10. The 2Gbytes quoted in the piece would come to $0.20. So our sums need to be divided by a factor of 5. That $112 per month cost in bandwidth to the poor ISP? Try $22 and change. The $560 per month quoted for HDTV done over IP is really more like $112.

Then there are economies of scale. And the fact that bandwidth prices keep on falling : and they will keep falling for a while yet. (It's a great book by the way, and well worth a read).

Finally, and this is key : the cost to ship a GByte between two points within BellSouth's own network is a fraction of the cost of delivering the same Gb across the public internet. You can cache p2p traffic (when it's done the way it will be for main stream, mass adoption) and if you are downloading in the old style way you can definitely cache. So your prices drop even more.

1Terabyte of data in a few years time? Forget the $560 they quote, and try nearer $56 in a galaxy not that far away

Update 27 March 2006 re: bandwidth costs. If Amazon can run an online storage business selling bandwidth at $0.15 per GB to anyone, with no startup costs and no minimum spend, I don't think my bandwidth cost estimates are widely off the mark.


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