Snake Doctor

I remember when we thought it would never drop below $1 per gig transferred (which works out to a bit over $300/mbps)

Last year we saw it fall into single digits, and this year so far I'm hearing about people paying under $4/mbps for volume.

So how long do you think before it drops below $1/mbps? Or will it ever?

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BFT3K

Smart hosting companies will either adapt or die.

Based upon false data, it turns out hosting companies that offer 100% free hosting are now making more money than their competitors.

It sounds crazy, but it is true!

Phil21

My take right now.. is a little while. There will always be some providers pushing the envelope of course, but I just don't see the fundamentals getting down to sub-$1 any time in the near future. There simply is not enough traffic out there to make it attractive to companies to compete for yet.

What price drops take basically, is an increase in overall traffic, as well as networking equipment to reach the realm of affordability for that new "baseline" level of traffic.

Essentially, if you can come to a provider and say "I will pay 50% of my current per-unit bandwidth costs now, but I will commit to so much that my total bill will be a net increase of 30%" you will start seeing prices drop rapidly again. When a sales department of a major company can show an increase in total revenue - it's a hell of a lot easier to get signoffs approved on those deals, than simply "trying to keep a customer". And I'm talking the Tier1 type of providers - where it doesn't cost them "per megabit" so much, as it is more along the lines of "per lit wave" and "per network interface".

Currently - and I certainly have been wrong before - I don't see the above happening on a large scale.

But to illustrate. If you're currently paying $10/Mbit to a provider for 100Mbit, and make an offer to them of "I'll increase my usage to 1000Mbit, at $5/mbit" I think you will find many providers taking you up on that. Tweak the actual numbers however you will, but you get the idea. Coming to them and saying "I want my 100Mbit at $5/mbit" you will find much more resistance, as it's a net revenue loss vs. gain they can show on the balance sheet.

This ignores *many* more variables of course, and oversimplifies things. But in my experience now, I've seen the above rule of thumb hold fairly true through almost 10 years of being in the business. I don't see it changing fundamentally any time soon.

-Phil

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BV

Personally I wish it would go back up to 1 dollar a gig.

Spudstr

1/Mbps will never happen. the raw cost for equipment and leased fiber, even with IRU's on the fiber 1/Mbps is simply just not profitable well it can be but not a whole lot.

Unless of course you peer with everyone and their brother in your _one_ location then maybe its a option but 2.5-3/Mbps is a strong support that would be hard to drop, unless that tier2 network is grossly overselling.

I believe the new market is sub 10/Mbps all around, kinda like the drop we saw from ~100/Mbps in 2001 over 3 years it dropped dramatically down into 20-30's and then 3 years later 10-20's. Now we are in the 4-10 market.. but there is a bottom.. raw operating costs..

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BFT3K

Smart thinking! Voluntarily paying MORE for stuff is almost as good as giving all of your content away for FREE! You are really coming around on all of today's newfangled business strategies. I'm really proud of you BV! Kudos to you!

After Shock Media

I always liked 7-9 a gig and 70 dollar domains. Plus no high PPS rates.

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mynameisjim

I heard a telecom exec saying we are just using all the bandwidth during the dot com boom and eventually we will hit a ceiling and pricing will go up. I wish I could find the article but it was an exec from ATT. Not sure if was just scare tactics or spin though. His thought being that nobody has really added capacity in a long time and with the current economic times, nobody is planning on it. All the infrastructure dollars are going to wireless.

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Spudstr

New technology everyday, to cram more into each wave, more waves into each strand of fiber. I read that article you are referring too and that exec is an idiot. We went from SONNET services to better cwdm/dwdm metro services and have cranked up capacity in ridiculous amounts in the past 10 years.

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Phil21

Which is precisely why $1/Mbit will eventually happen. Period.

Keep history in context here. We used to measure bandwidth in *bits* per second. We bought leased lines in kilobits per second not so long ago! For many thousands of dollars.

Heck, I remember buying my first colo off a fractional t1 (omg fast!!!) which included 64kbit of bandwidth, and additional blocks of 32kbit were a steal at $250/mo each. This was well under the market at the time. The whole 512kbit t1 line was around $2700/mo if I recall - it's been a while. That's $5,400 per megabit.

There *will* be a day when we measure bandwidth in gigabits per second, and megabits are entirely irrelevant in day to day discussion. Will I live to see it? I very much believe so. All the providers will be bragging about their new leeto terrabit connections to the interwebs, etc. Heck, who knows if hosting providers will exist as we know them today in the future.

We just lit a dark fiber ring at *320 Gigabit* for mere 10's of thousands in DWDM gear. In 1999 I remember similar gear being quoted in the millions.

My point is: You will look back on your 'never' comment 10 years (or whenever) from now and cringe at wtf you were thinking I know I've done it!

That said, as I mentioned I don't believe $1/Mbit will be sustainable in the near future. Current networking gear as you mentioned by itself is too expensive to do so. However, that is rapidly changing as you know. Just 3 years ago 10ge equipment was what, triple the price it is today?

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hjnet

I'd guess by 2011/2012 we're seeing $1/mbps

qxm

$1 a GIG? Sounds Sexe! Someone hit me up on ICQ whenever dat happens

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d-null

great post

interesting to think of what the content will be that will be moving on those connections and require so much bandwidth... will everything we do be in super HD just because we can? will we be streaming multiple feeds at the same time just for the fuck of it? how are we going to use up and waste all that bandwidth?

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NinjaSteve

The other thing you have to consider is managed vs unmanaged as well.

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$5 submissions

Man, that would be a one hell of a happy day when it comes. $1/mbps FTW

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strobi

The lowest deal I got is 1.8$/mbit (foreign hosted), so yes, this will be doable in the future!

strobi

(without servers and with a full SLA agreement)

hjnet

Wow, I thought $3/mbps is the lowest pricetag right now, didn't know that we're already THAt close, then I'm changing my prediction to 2010

marketsmart

whats dwdm up to these days? the last i saw was 8x about 7 years ago..

SweetT

I think bandwidth will continue to drop but not by as large of a margin and not as quickly. Gone are the days that a hosting company can go to its provider and get a few dollars knocked off of their per meg price...soon the negotiations will be for quarters and dimes....but yes, it will probably still drop.

There are two VERY IMPORTANT components to a hosting bill that are not going down, however...in fact, they are going up. Employees continue to get more expensive. Benefits are going up, taxes are going up and all in all employees are driving prices up. The other component is DATA CENTER SPACE. Data Center space is about to explode. I know of at least 3 very well established hosting companies that frequent this board who are sweating because they have recently learned that their data center rent is going to double, triple, or quadruple in 2009. The cost to power the DC is going up, the cost to cool it is going up, the cost of redundancies is going up. The Wall Street Journal reported a few weeks ago that by the end of 2009 demand will outpace supply in the data center world (yes, world, not US)....who knows what happens when there is more demand than supply? Yes, prices sky rocket.

So, to answer your original question....yes, I think bandwidth will get to less than $1/mbps, in fact, I think you are going to find it being FREE with the lease of cabinet space...which is going to continue to increase in cost over the next 2 years.

Of course, this is just my $.02. What do I know? I am an idiot.


--T

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Spudstr

typically about 40 channels per fiber stran for metro stuff.


We met with ciena networks last week for some dwdm gear, they claim they can pack in up to 100Gbps over 1 wave. soo 400Gbps over a pair of fiber? heh I'm new to dwdm stuff these days.

You can still run passive optics and do 8 channels for the cheap and do up to 80Gbps that way though.

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Spudstr

With the financial issue and all the major datacenter builders, equinix, DFT, DRT,S&D etc haulting construction for a while is going to put a HUUUUUUGE strain/shortage until 2010/2011 until the bigger players finish what they haulted.

We have seen local floor space go from 12/sq ft to 35/sq ft in the past two years here in northern VA. Its a big land grab

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Techie Media

Thanks Tony you just saved me a whole bunch of typing bro. What you said is right on except the part about you being an Idiot.. we all know that's not true.

Those few host that are building their businesses by giving away BW at a 1-2 buck profit don't see the big picture of all the other costs involved in hosting and will eventually go under as many have in the past and of course they also cannot afford to give the customers any of the other important products such as Quality Tech.customer support, quality data centers and infrastructure etc..... Oh well Like i said T, you said it all.

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Snake Doctor

I agree with everything you just said except the thing about taxes, unless you're referring specifically to Atlanta. I haven't heard anything about this.

And I also disagree with you being an idiot. I prefer to think of you more at the "dumb ass" level.

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WiredGuy

Thanks Tony ;)
The cost of the DC going up is something I never thought would happen.
WG

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SweetT

That is correct. We are building a metro ring now and have quotes from all of the major providers. Ciena gear can handle 100Gbps on a single strand (which even though all of the gear providers say is 200Gbps it is still really only 100Gbps redundant)....but it is still a good size hit against capx costs. We got them down to about $240k with their single chassis redundant boxes. Transmode is playing at the bottom of the list doing 40Gbps redundant for about $150k. We are leaning towards the Adva gear because they are between the two but they are located about 8 miles from us and we like having our vendors in our backyard. ;)


--T

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SweetT

Very well said. I agree 100%.

This is why in the coming weeks you are going to hear some really big news from your favorite Atlanta based web host.


--T

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SweetT

Aw, shucks. I just calls 'em likes I sees 'em


--T

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MaDalton

we just got offered from a VERY reputable host $3 per mbps - not for my shop though i have to admit, i'm by far not doing enough traffic with that.

but a price below $1 is only a question of time - give it 12 to 18 months from now and you will see the first one doing a thread on GFY announcing 99 cents per mbps ;)

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SweetT

I guess I should be thrilled to be at the "dumb ass" level in your eyes, huh? I take that as a compliment

As for the taxes, I dont want to turn this into a political discussion because I know how much you love Obama but lets not kid ourselves....he is going to raise *my* taxes and he is probably going to raise payroll taxes that *I* pay even if he does not raise the ones that my employees pay. Can we at least agree on that?


--T

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SweetT

It is happening every day, my friend....every day.


--T

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Nicky

Would be better if it got much more expensive instead.

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woj

Cost of cpu power, storage, etc is going down though, so each year more and more bandwidth can be pushed from the same data center... now a days 1gbit can be pushed from a single server, wasn't long ago when you needed pretty decent server to do 100mbit, or no?

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BradM

The japanese are doing incredible things with bandwidth and data transfer. It will drop to 0.10/mbps one day

Spudstr

Your Ciena rep already spilled the beans to us last week when they were trying to sell us on their dwdm gear ;-)

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Snake Doctor

Yeah he is going to raise your personal taxes by 4 points, probably in 2011, and at some point they'll fuck with social security taxes also, but that's only going to affect your employees making over 200K, and I'm going to guess that you can count those employees on one hand....so the overall impact on your biz will be negligible IMHO.

Anyways, back on point, that's two years from now so I'm guessing you don't see bandwidth in the sub $1/mbit range before then?

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SweetT

Yes, you are correct that hardware costs are going down but as they go down the associated costs are going up. For example, in the same 2U of space we can now store more content and push more bandwidth than ever before. HOWEVER, the power supplies and CPUs are taking more power and producing more heat than ever before to achieve that goal. So now a DC needs bigger generators, bigger switch gear, bigger UPS, bigger HVAC, bigger everything. At the same time power costs themselves are going up. Just a few years ago I was paying $.04/kwh for power...now I pay almost $.09....power costs have more than doubled! In addition, Obama is proposing higher taxes on power consumption especially those power companies that mainly produce power from Coal so we are expecting those costs to go up dramatically by 2010.

--T

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SweetT

Hard to keep a secret in this biz, huh? ;)


--T

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SweetT

I hope you are right about the taxes...I have always felt that any tax increases that he was going to do will happen this year and next because after that he starts campaigning again.

As for your question, I dont see the prices going to LESS than $1 in the next two years....but I do see them getting there.


--T

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Snake Doctor

Good point about the electricity tax earlier, I wouldn't have thought of that.

Although lucky for you, it looks like the cap and trade plan is DOA, he's gotta save his capital for health care.

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Spudstr

Its a small small world

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Drake

Wow interesting times ahead

jay23

As a VOD software vendor I have my own matrix that calculates the cost of delivering an hour long SD movie. I calculates storage, bandwidth, service etc etc.

8 years ago when i got into this business 1GB of managed storage was $10/GB, today its less then 25 cents a GB and these days 1GB of managed bandwidth is around 10 cents (yes i know you can get 2c/GB but note the word 'managed')

The opportunity I see is that a lot of adult companies don't want to have their own IT departments, its just way too expensive these days and this allows hosting companies to sell advance services on top of their regular offering and become end to end providers.

Jay

webair

Well said Jay!

This is exactly why WEBAIR has invested millions of dollars into our dark fiber ring infrastructure & into massive amounts of data center space. Our network is now connected to every pop in NYC and beyond (We currently have access to POPs that contain 300-400 providers). Data center space is becoming a commodity. Owning our own facility has given us a HUGE advantage over competitors, at least the ones that colo with other companies. The arrangements we have on power protect us from fluctuating costs. Additionally, we are very close to securing an additional 50K sq feet in the heart of NYC which is now offering HUGE INCENTIVES to tech companies who are 'power savvy'. Our NEW Long Island facility falls under "The Empire Zone" which offers discounted power and employee incentives for opening in designated areas. All variables that you should look into when choosing a host to partner with.

With regards to hardware costs we have spent well over 2 million in the past 2 years investing heavily into our New Managed Storage Hosting Solutions, which allows us to pass on large savings hardware wise to our clients. We have spent a great deal of time focusing on our energy efficiency by using servers that use less power, virtualization, cloud storage. The same thought process goes into how we operate the UPSes and HVACs in our data centers. Working closing with NYSERDA (New York State Energy Research and Development Authority) has helped us design and subsidize more efficient systems and the help lower the cost of building state of the art facilities.

As for $1 per mbps? Who knows for sure. The costs for bandwidth are already very low and the more you push the more you save!

AWESOME THREAD! It's great to see webmasters taking interest in the details!

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Dennis69

You and me both!

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SweetT

I am pretty sure that you really did not mean to say that, right Mike? There is no way that DC space is becoming a commodity. There are VAST differences in data centers and they are not going down in price so there is no way that they are becoming commoditized. Being a commodity assumes that they are all the same and that the only things separating one from the other is price....and that's just not the case. I assume that you just got so excited about all the cool things going on for you guys that it just came out wrong ;)

Good to hear about your growth!! Keep it up!!


--T

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webair

com·mod·i·ty (kə-mŏd'ĭ-tē)
n. pl. com·mod·i·ties

1. Something useful that can be turned to commercial or other advantage: "Left-handed, power-hitting third basemen are a rare commodity in the big leagues" (Steve Guiremand).
2. An article of trade or commerce, especially an agricultural or mining product that can be processed and resold.

It was used more as a figure of speech T. Apologies for any confusion i may have caused you...

Good to see that you read my posts with such care and attention to detail!!

Love ya man!

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SweetT

Hey I was just looking out for ya, Mike....with all those millions of dollars you keep spending I would hate for you to cheapen it by calling it a commodity. You really should be proud of what you have built, my friend!!!


--T

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Snake Doctor

Perhaps Mike could set aside a percentage of those millions he's spending to take some "tactful ways to promote your company in hosting threads" lessons from Tony and Jim.

Of course, two big paragraphs with bold highlighted print and links to talk your company up, followed by a one line "shucks I dunno" answer to the question the thread asked might the way to go.

What do I know? I'm just a webmaster.

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Nautilus

Now that's an interesting question.

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