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0 pointsJumpCrisscross14y ago0 comments

A September 2008 price sheet for Level 3 priced 10 Gbps at $6/Mbps [1]. The same group projects 2012 transit prices at the minimum commitment around $2.34/Mbps and decreasing at about 60% a year [2]. Another source pegs this at 30% a year for the single price blended rate [3].

In the US we pay about $3/Mbps [4], suggesting a healthy minimum 1/5 profit margin. This happens to be around CMCSA's 1/5 operating margin (suggesting the transit price is lower) [5].

I couldn't find data for internal transit prices, but assuming everyone runs with about a 1/5 margin on transit costs as well (likely too dear) we can take $1.9/Mbps as being a decent relative estimate of internal costs. This is a $0.45/Mbps or 15 percentage point to revenue difference.

[1] http://drpeering.net/AskDrPeering/blog/articles/Peering_vs_T...

[2] http://drpeering.net/white-papers/Internet-Transit-Pricing-H...

[3] http://conferences.sigcomm.org/sigcomm/2011/papers/sigcomm/p...

[4] http://dailyinfographic.com/internet-speeds-around-the-world...

[5] http://www.google.com/finance?q=NASDAQ%3ACMCSA

0 comments

megaman82114y ago

Thanks for the links. The problem with your profit margin calculation is it assumes 100% of consumer traffic is going out to a different network and that Tier 1 ISPs have arrangements where incoming and outgoing traffic on their networks cancel out so they usually end up paying each other very little money.

JumpCrisscrossOP14y ago

Yup, that's why I labelled it as a minimum profit margin and parenthetically noted that the cost per Mbps used is probably higher than reality.

ericd14y ago

What's the duty cycle on those cost numbers? A 250 GB monthly data cap would be 0.8 mbps at 100% duty cycle, which suggests that the interconnect bandwidth costs are a very small fraction of the price of a 20 mbps plan.

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