Monday, July 19, 2010

Big Pipe, small beer

A small footnote to our Big Pipe motif:
Big ISPs usually rely on peered connections to other major ISPs, connections which incur no per-bit cost. As for the cables in the ground, they've been there for years. The equipment back at the headend must be installed once, after which it runs for years. Cable node splits and DOCSIS hardware upgrades are relatively cheap. Requesting one additional bit does not necessarily incur any additional charge to the ISP.

If most Internet costs are fixed (and the National Broadband Plan agrees that they are), and if bandwidth is dirt cheap, what "charges" are heavy Internet users ringing up for ISPs like Time Warner? ...

TWC's revenues from Internet access have soared in the last few years, surging from $2.7 billion in 2006 to $4.5 billion in 2009. Customer numbers have grown, too, from 7.6 million in 2007 to 8.9 million in 2009.

But this growth doesn't translate into higher bandwidth costs for the company; in fact, bandwidth costs have dropped. TWC spent $164 million on data contracts in 2007, but only $132 million in 2009. - Nate Anderson

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