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ISPs 'Exaggerate the Cost of Data' 173

Posted by timothy
from the learned-it-from-the-telcos dept.
Barence writes "ISPs are wildly exaggerating the cost of increased internet traffic, according to a new report. Fixed and mobile broadband providers have claimed their costs are 'ballooning' because of the expense of delivering high-bandwidth services such as video-on-demand. However, a new report from Plum Consulting claims the cost per additional gigabyte of data for fixed-line ISPs is between €0.01-0.03 per GB. The report labels claims of ballooning costs a 'myth.'"
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ISPs 'Exaggerate the Cost of Data'

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  • Yea. (Score:2, Insightful)

    by Anonymous Coward

    No fucking shit.

    • by arisvega (1414195)

      I believe that many of the ISPs have been spoiled: all these years, and in particular after the aDSL boom, they were used into money pouring in with no real expenses in place-- especially since most of them did not even have to bother with digging the actual streets for more cables, since that was supposed to be a phone provider's domain (a Someone Else's Problem situation)

      What has changed now is that internet usage is catching up, things are really starting to look like they did some years back in the shin

  • Carefull (Score:4, Informative)

    by Trubadidudei (1404187) on Saturday October 08, 2011 @07:44AM (#37647036)

    Note that this research was funded by the content providers (like skype) ISPs were asking to pay extra for the bandwidth their services use. I'm not pointing any fingers, but it's something to think about.

    • by lennier1 (264730)

      ... Option C: All sides are talking out of their asses and the truth is somewhere in the middle.

      • Re:Carefull (Score:5, Insightful)

        by gmack (197796) <gmack@iPOLLOCKnnerfire.net minus painter> on Saturday October 08, 2011 @08:06AM (#37647094) Homepage Journal

        Not really, In places where the b/w costs are competitive (server hosting) I don't pay much more than that. ISPs only get to charge more because there are fewer options, on the other hand, last time I was in a telco building pretty much everyone was using ATM switching equipment and that will drive the costs up.

        • by tech4 (2467692)
          I'm sure they would provide you bandwidth at that price if you moved living inside server farm and one of the large peer exchanges.
          • Re:Carefull (Score:5, Insightful)

            by gmack (197796) <gmack@iPOLLOCKnnerfire.net minus painter> on Saturday October 08, 2011 @08:31AM (#37647170) Homepage Journal

            That is exactly my point. The entire cost of running an ISP is the costs associated with the "last mile" and they are using that to overcharge. I would be much more understanding if the limitations I faced were due to the copper rather than artificial charges from the ISP side.

            • by tech4 (2467692)
              Which is far from cheap, even less so as technology in this area has been advancing really fast the recent 20 years and they've had to do it several times. It costs several thousands to bring those cables to just one building and even more in cities as you need to open up the streets. They are making it as an investment, hoping to get it back in subscription fees within several or more years. It's hard from artificial charges.
              • by gmack (197796)

                The monthly rate more than covers that cost of installation and maintenance of those lines. The technology advance is quite honestly not expensive even at $60 per port on ADSL2+ equipment (slightly high) they can expect to make that money back long before the next technology rollout. And quite frankly, they haven't had to worry about changing the actual cable (and no, it shouldn't involve tearing out streets at this point because most of that is in conduit) until recently with the moves to fiber.

                To be cle

            • by shentino (1139071)

              And that so called "last mile" would be better off in the hands of the local city council.

              I find it very telling that Monticello tried that and got sued.

      • You mean, the truth is ... Option B?! Wow! Now, what exactly was Option B?

      • Re:Carefull (Score:5, Informative)

        by TubeSteak (669689) on Saturday October 08, 2011 @10:04AM (#37647562) Journal

        Even for ISPs running their own network, such as BT, Davies [CTO of communications provider Timico and a member of the board at the Internet Service Providers' Association] claims the figures of â0.01-0.03 per GB are "rubbish". "It's an order of magnitude greater than that," he claimed.

        One order of magnitude.
        So.. â0.10-0.30 per GB?

        The difference between â0.01 and â0.10 doesn't strike me as "somewhere in the middle."
        Not when they're charging â10.00 for a gigabtye.

        • by Xugumad (39311)

          Actually, they're charging £2.25/GB for overage ( http://www.timico.co.uk/soho/ip_connectivity/adsl [timico.co.uk] ), although Timico have the most insane pricing I've seen in an ISP. Two lines on their 50GB/month service (£22 each) are a cheaper option than their 100GB/month server (£50).

          A much saner (business) pricing example can be found from Demon: http://www.demon.net/broadband/business-broadband [demon.net] - if you're in an exchange with LLU, £19/month gets you a 200GB allowance during peak hours and un

        • by geogob (569250)

          Or someone uses the term "order of magnitude" without actually knowing what it really means, not that this ever really happens.

        • by Reziac (43301) *

          My provider is a one-man band and he likes to talk about his business. He told me flat out that he asks customers to be reasonable about uploading because uploading costs him money, but downloading is free.

          The cost? He told me it was about 5 cents per GB. (Bandwidth bought directly from AT&T.)

      • Re:Carefull (Score:5, Insightful)

        by zippthorne (748122) on Saturday October 08, 2011 @10:52AM (#37647832) Journal

        The truth is never in the middle. Sometimes the truth isn't even on the same axis as the claims. The truth is what the truth is, and you can't find it by simply averaging the claims of interested parties.

        The truth, in this case, is that the ISPs are balkanized monopolies. Except for a few places, you've only got one or two options in any given area. Since there's no real competition, they can basically charge what they want. The costs don't really come into it.

    • Re:Carefull (Score:4, Interesting)

      by mabhatter654 (561290) on Saturday October 08, 2011 @09:46AM (#37647450)

      The point of asking content providers is that they are a fixed quantity with deep pockets. ISPs know they can't go to the regulators because if the books on the situation got opened they'd get smack from legislatures.

      The big problem is that "the Internet" is still very much a series of nonuniform networks with lots of people trying to make toll booths rather than a "fabric" across the country. For instance my Comcast connection to the Internet shows up 30 miles away in the next city when the route is traced. When I had AT&T I think it went over 100 miles before it was "on the Internet".

      This is a problem because when you use Skype to call your friend across town with a different ISP the ISPs are holding Skype up for cross-state traffic that should just go across town. That's the problem that needs to be addressed.

    • by richlv (778496)

      wait, what "their services" ? is skype now financing internet connections to households ? last i heard it was households/individuals getting an internet connection to use for data transfer... which would be like somebody buying a car and then getting told by the manufacturer "oh, you will transport pumpkins with it ? there's a 30km limit on it, after that it's 2.5 units per km !" (there's a car analogy; and i might be in favour of it as i don't like pumpkins)

  • by Alcoholic Synonymous (990318) on Saturday October 08, 2011 @07:45AM (#37647038)
    Another report by the same Institution concluded that water is wet, electricity is not magic, and that dinosaurs are in fact extinct. The results are still pending on if a duck weighs less than water though. But on a serious note, it's good to see people calling bollocks on these claims. It's not that these things aren't problems, it's that they inflate the cost estimates grossly and delay infrastructure upgrades purposely.
  • That figure is the amount that I pay for data from my colo, but that assumes that the infrastructure already exists. If you have a cable network with 100Mb/s of bandwidth, then you can sell 10Mb/s connections to 10 people. If you've sold them to 5 people, then the cost of adding another customer is basically zero. You can probably get away with selling 10Mb/s connections to 100 or even 200 people if they have typical modest usage patterns, because each one will still be able to get 10Mb/s for the short p
    • by jgreco (1542031)

      We used to have this thing called Ma Bell that had the same problem: they amortized costs over decades. It worked.

      It doesn't bother me too much that service providers would prefer a shorter timeframe in which to recapture their invested funds, but the problem is that they then want to keep charging the higher prices even after they do, make only modest further improvements, and rake in profits at insane rates. Where I live, cable Internet prices have been basically flat for more than a decade, and perfor

      • Amortising costs over decades works for a telephone system. They transitioned the exchanges from loop-disconect to DTMF, but aside from that the wires laid in the '20s still work today. They've had almost a century to make back the initial (taxpayer subsidised) investment. The demands of an analogue voice channel have remained constant for that entire time.

        When it comes to Internet access, the demand changes much more rapidly. In 2001, I had a 1Mb/s Internet connection, and it was the fastest that my

        • by sjames (1099)

          The vast majority of the cost of a fiber connection is in laying the fiber. Next is the cost of the fiber itself.Fortunately, technology improvements in the last 15 years have allowed the old fibers to carry several orders of magnitude more data today by upgrading the transceivers at either end.

          These costs (all of them, including the cost of upstream) are based on the data rate, not the number of bytes transferred. A cable not actively transferring data is just wasted resources, it doesn't cost any less tha

    • by fluffy99 (870997)

      That figure is the amount that I pay for data from my colo, but that assumes that the infrastructure already exists. If you have a cable network with 100Mb/s of bandwidth, then you can sell 10Mb/s connections to 10 people. If you've sold them to 5 people, then the cost of adding another customer is basically zero. You can probably get away with selling 10Mb/s connections to 100 or even 200 people if they have typical modest usage patterns, because each one will still be able to get 10Mb/s for the short periods that they saturate the line. If they start all using the connection at the same time, then you have no choice but to increase your overall network capacity. This means laying more fibre. The cost may still be under three eurocents per gigabyte, but that's amortised over the entire life of the new cable, which may be a decade (or more): the ISP has to pay for it all up front. This is where the increase in costs comes from. They have to make significant capital investments, they don't have a significant change in their operating expenses.

      Which is exactly what's happening. The ISPs are badly oversubscribed because customers in the past were barely using the bandwidth they bought. They just wanted a faster download on occasion. Now they're all demanding streaming netflix in the evening hours and the telcos are having to increase the infrastructure bandwidth to keep up. This is especially true for cell service. You might have 4G speeds to the tower, but that tower is heavily oversubscribed

      This is really their own fault for advertising hig

  • When you shop around for hosting, the price/GB can fluctuate wildly. Amazon's EC2 is almost at the top with $0.12/GB, but Cogent at $5/Mbit (~0.015/GB) is one of the cheapest for transit/paid traffic.

    Even less? How about free, using peering agreements on internet exchanges? This way, providers like Hetzner can sell their bandwidth for even less, like 5-10TB included and â 6,90/TB after (â 0.0069/GB).

    ISP's should just whine less and do their homework. I can understand small ISP's having trouble whe

    • Cogent at $5/Mbit (~0.015/GB)

      Remember service sold by the megabit per second is typically based on 95th percentile usage, NOT average usage. So what you say is only true if your usage is near constant. Most people/companies usage isn't.

      Also IIRC cogent is known for getting into peering spats that cut them off from large parts of the rest of the internet. So afaict they should only be used as part of a multihoming strategy, not as a sole provider.

      • by sjames (1099)

        Yes, it 's 95th percentile. However, as you aggregate users, the spikes tend to average out into a more constant usage. The 95th percentile billing actually helps that by shaving off the peaks. Add in that ISPs don't give committed rates at all these days and do not hesitate to throttle and you reach a very close approximation of constant usage.

        Also keep in mind that a national ISP has a huge volume of traffic and so they can demand even lower prices.

  • How do you go about setting up an 'open ISP'? I wonder about a business plan for such a thing. There is rent, the connections, lines, equipment. Sounds costly. I'm sure there a way to set up a mesh network without an ISP at all, something like I2P without any ISP, having multiple hubs over cities, that connect one to another directly, getting away from the normal ISPs.
    • by sgt scrub (869860)

      Setting up a mesh network in heavily populated areas, like London, would be easy. It would simply require everyone use wireless routers with no password protection. The cost of connecting between heavily populated areas would be disgustingly cheap. The reason it isn't happening is there is liability attached to transferring content. Instead of a world free to communicate -- free of charge -- we have a morality laws and copyright laws and sensor-shit...

      • It also wouldn't at all be the same as the Internet if it was London connected to London and New York connected to New York. A bunch of individuals sharing consumer-grade equipment are not going to connect London to New York, Tokyo, Houston, Sydney, Taipei, Paris, Frankfurt, Oslo, San Francisco, Tel Aviv, Cairo, Ottawa, or Warsaw. The Internet is global, after all. At some point any replacement either has to replicate the long links or use them.

        • by sgt scrub (869860)

          You missed this sentence in my post? The cost of connecting between heavily populated areas would be disgustingly cheap.

  • The cost varies. I can get a 30meg bursable to 90 fiber connection in Downtown Ft. Myers, FL for around $1100/month. Getting it outside of Downtown and the cost is more than 3 times that. And there are many places where I could get bandwidth far cheaper than that (Tampa Miami).

    If you buy water next to a river it will be cheap. Want water in the middle of the desert it's going to cost. It's not the cost of the water, it's the cost of moving it.

    Video on demand (Netflix, Hulu, etc) uses 10 times the bandwidth

  • Davies said this is especially the case for smaller ISPs who rent lines on a wholesale basis from BT.

    Nice how he compares being overcharged by an internet service provider as the cause behind the need to overcharge people for internet service provision.

  • the companies officers over compensation?

    Really they are just jealous/greedy that someone else is making money (sometimes more) on their transport system.

  • What seems to be missing from this analysis is the constantly changing infrastructure. While the cost for additional traffic may be low given that infrastructure, in the real world the intrastructure - especially the mobile one - needs regular updates, increasing the costs of the future additional traffic that drives the needs for these infrastructure updates.

    In the past decades we've seen regular modems, 56K, ISDN, ADSL in many varieties, Internet over cable TV, fiber, GSM, WAP, GPRS, UMTS, Edge, HDSPA, al

  • Incomplete Picture (Score:3, Informative)

    by argontechnologies (865043) on Saturday October 08, 2011 @09:39AM (#37647418)
    I run a wireless ISP in Texas. The cost of buying upstream bandwidth doesn't change much, it in fact gets cheaper per Mb/s as the pipes get huge. The real cost change is in delivery. The backbone between towers, and especially in the access points all have to be increased to accommodate the additional load. In some instances, the access points cannot technologically accommodate the load yet. The ISP model was designed on a over-subscription basis. In other words, you could have 10:1 users using a give bandwidth. With the advent of video like Netflix, this model is no longer going to be viable. We are seriously looking at having two different account types. One that will allow short video bursting, and one that will allow continuous video feeds. The latter account will cost much more than the former since it is what is driving the costs.
  • Water is wet.
  • by taxman_10m (41083) on Saturday October 08, 2011 @09:45AM (#37647448)

    This seems to be a general practice of business. Isn't that how the banks have been explaining minimum balance fees? It costs them so much to maintain these particular accounts that they are forced into charging onerous fees.

  • by Nishi-no-wan (146508) on Saturday October 08, 2011 @10:11AM (#37647590) Homepage Journal

    Countries outside of the U.S. have no problem offering high speed unlimited data at affordable prices without any of the problems that the U.S. carriers are claiming. And the best deals are often on mobile! And, yes, there is heavy audio and video traffic in other countries as well.

    • There's also a lot of countries outside of North America that are smaller than many single US states or Canadian provinces. It's easier to do things on a small scale. Bandwidth is cheap in the US, too. It's the loop costs that get you.

      • by sjames (1099)

        That's an age old excuse here, but it doesn't explain why the rates are so high in our densest population centers. It also doesn't explain why telecomm companies are so desperate to keep municipal service from being deployed in places they claim they can't profitably service.

        • I wish it was an excuse rather than reality. I can get a 100 meg of transit for $1,100 from a provider that is not Cogent. That's perfectly fine until you see the loop price for the last mile is quoted at $3,200 for a cheap Verizon FastE loop. AT&T wanted $10,000 for an OC-3 port (that's not a typo, ten thousand dollars) and they couldn't/wouldn't do FastE. And AT&T already had fiber in the building. The rates are still high in dense population centers because they can and will charge such prices. W

          • by sjames (1099)

            That still leaves it as an excuse rather than being a valid reason. AT&T uses the excuse all the time and just evades the question when we ask why they want so much in loop charges for a building they already serve in a dense urban area.

            • The valid reason is "because they can" and they demonstrably do. There is no excuse.

              • by sjames (1099)

                Because they can is NOT a valid reason. That's not to say that greed isn't the reason, just that it's not a valid one. In a healthy market they would be forced to charge less or leave the market.

                • I find it unlikely that AT&T will ever leave the market and there's no need for them to lower prices, so we're left with "because they can". I suppose we could try the antitrust thing again someday.

                  • by sjames (1099)

                    We could try actually regulating the markets to make them healthy OR driving AT&T out by providing the last mile as a socialized service.

                    What we must not do is ever accept AT&T's excuses for their pricing.

  • Hold on (Score:4, Informative)

    by Dwonis (52652) * on Saturday October 08, 2011 @10:44AM (#37647786)

    Plum Consulting claims the cost per additional gigabyte of data for fixed-line ISPs is between €0.01-0.03 per GB

    Is that €0.03 or €0.0003 ?

  • by kilodelta (843627) on Saturday October 08, 2011 @03:30PM (#37649502) Homepage
    Is power. And power had been fairly stable. Add to that the fact that newer routing gear isn't as power hungry as the old and you can see we are getting raked over the coals.

    It's the same thing with telephony. The long distance market fell apart because the cost to carry the calls kept dropping with increased levels of automation. Now long distance is bundled in with the normal monthly cost of most phone plans wired or wireless.

    And even wireless services, they're getting increasingly less expensive to provide too. But they'll try to charge all the market will bear.

    And need I bring up banks that rely on some of the technologies above? Why do you pay a foreign ATM fee that's a full 30% of the average $20 withdrawal when we KNOW that the cost for the network transports are hundreths of a cent per transaction? The bottom dropped out, but banks being greedy, rapacious bastards, will charge all the market will bear.
  • Call me when this has been subjected to something resembling peer review and still holds up. As it is, the source of this report has suspect motivations given who paid for it. This could be 90% confirmation bias.

  • Almost all of these types of reports citing how cheap *additional* gigabytes cost only reflect the marginal costs. They don't reflect the underlying infrastructure cost, the cost of workers (often union) and their healthcare benefits. This is why when we look at broadband providers financials, the gross profit margin will be in the 60% range but the net profit margin will be in the sub 10% range.

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