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How long before bandwidth is less than $1/mbps
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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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! |
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 |
Personally I wish it would go back up to 1 dollar a gig.
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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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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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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? |
I'd guess by 2011/2012 we're seeing $1/mbps
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$1 a GIG? Sounds Sexe! Someone hit me up on ICQ whenever dat happens :)
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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? |
The other thing you have to consider is managed vs unmanaged as well.
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Man, that would be a one hell of a happy day when it comes. $1/mbps FTW
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The lowest deal I got is 1.8$/mbit (foreign hosted), so yes, this will be doable in the future!
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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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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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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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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..:1orglaugh 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.:pimp :) |
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And I also disagree with you being an idiot. I prefer to think of you more at the "dumb ass" level. :winkwink::1orglaugh |
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Thanks Tony ;) The cost of the DC going up is something I never thought would happen. WG |
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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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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. :winkwink: --T |
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Aw, shucks. I just calls 'em likes I sees 'em :winkwink: --T |
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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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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--T |
Would be better if it got much more expensive instead.
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The japanese are doing incredible things with bandwidth and data transfer. It will drop to 0.10/mbps one day :)
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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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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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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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Hard to keep a secret in this biz, huh? ;) --T |
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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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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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