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Bandwidth costs, real and virtual

Eye on the Carriers By , Network World
April 02, 2008 04:48 PM ET
Johnson

Network World - Being a pundit, like being in love, means never having to say you're sorry, right? Wrong. Besides, that's got to be one of the dumbest lines in history — from what I can tell, loving someone means acknowledging your mistakes early and often, and making reparations as best you can.

So in the spirit of acknowledging mistakes, here's a whopper: Two weeks back, I mentioned that Cogent sold 10 Mbps Ethernet access for $1,000 per month, for a unit cost of $100/Mbit.

Whoops. That should have been 100 Mbps and $1,000 per month, for a unit cost of $10/Mbit. (Memo to self: Next time, check notes. Don't rely on memory — particularly where orders of magnitude are involved).

The lower rate matters not just to the good folks at Cogent — who naturally wrote to protest — but also to telecom managers seeking to benchmark their bandwidth expenditures. The fact that you can purchase a monthly mega bit of bandwidth for less than the cost of a cocktail in Manhattan is significant — and illustrates one of the reasons that companies are turning to Ethernet services. If you're spending considerably more than that (such as, ahem, an order of magnitude) you'll want to revisit your network architecture.

And there may be other reasons to do so, as well. Just as the costs for bandwidth are plummeting, companies also are increasingly turning to virtual network operators (VNO) and bandwidth managers — such as Virtela, Vanco, Megapath, Masergy, iPass, Fiberlink and New Edge — that provide services either entirely or partially across network infrastructure they don't own.

There are several reasons for this. For companies that operate globally, VNOs dramatically simplify the challenge of locating and procuring carrier services, particularly in far-flung countries. Instead of negotiating with thousands of carriers you've never heard of, you strike a deal with one provider (the VNO), which manages the relationships on your behalf.

Better still, the rates may be lower than those you can negotiate on your own. This isn't always the case, but often the VNO buys "bandwidth in bulk" from local providers, and uses its power to negotiate favorable rates.

The added level of management and support offered by VNOs can improve service quality and reduce the number of folks a company needs to keep on hand to troubleshoot. And finally, VNOs may be able to assist in configuring third-party connections (links that a company requires with business partners and suppliers).

Obviously, there are downsides, the greatest of which is that relying on a VNO limits the granularity with which you can manage your own network. Companies for which the network is the single most vital piece of infrastructure, such as utilities and transportation firms, generally shy away from outsourcing it to a VNO.

But the bottom line is that just as the cost of raw bandwidth is coming dramatically down (because of Cogent and others), its global availability is exploding (because of VNOs and bandwidth managers). And that, in turn, means it's wise to revisit your WAN strategy if you haven't done so in a while.

Read more about lans & wans in Network World's LANs & WANs section.

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