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R 16 per Mbps per month


2008-03-11

A new USD 300 Million, 10 000 km Pacific cable is being built, promising 7 Tbps and bandwidth costs as low as USD 1 Mbps per month.

According to DSL Prime, the popular telecoms newsletter from Dave Burstein, Bharti Airtel, Global Transit, Google, KDDI Corporation, Pacnet and SingTel are building a new cable from Tokyo to Los Angeles.

Burstein points out that while there is no shortage of capacity on the route, the companies decided it would be cheaper to lay their own cable which is expected to be operational within two years.

“If the full 7.68 Terabits per second (Tbps) of bandwidth were efficiently used (impractical), that would equal 7 million or so megabit connections. $300M over the standard 20 year lifetime of an IRU is $15M per year, or $2/megabit annual capital cost,” said Burnstein.

“Add operating and repair costs, as well as a factor for interest, and the cost is perhaps $6/year. Only part of the capacity will be used initially, and networks run well under peak capacity most of the time, so I'm setting the minimum per megabit cost at $10/year.”

“A final cost of even $4/megabit per month is less than half the high volume price of purchasing transit, and enables carrying a movie for a price in pennies. 32K or even 128K voice calls are a very small fraction of a penny. Upgrading dark fiber is considerably cheaper, so bandwidth costs should continue coming down.”

The article highlights that ‘Google is making volume deals like this around the world to gain a strategic cost advantage against Microsoft, Yahoo, and even major telcos.’

Two years ago, Google engineers were told to plan video and other high-bandwidth projects “as though the bandwidth was free, because the entire cost could be covered by the requirements for Google Search.”

“While that is probably exaggerated, Google has driven down their bandwidth costs dramatically. That hasn't been enough to dominate the market, however. One of my bigger mistakes was projecting Google Video's low cost basis would quickly bring them to the top. In fact, they never gained traction and finally bought YouTube,” Burnstein concluded.

Source: My Broadband
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