How we’re getting ripped off

Here’s a post examining the true cost of bandwidth in a worst-case scenario, using as an example a very-expensive 14,000-kilometer undersea cable. I like these worst-case scenarios as they illustrate just how much we are being overcharged for much, much cheaper (by about two orders of magnitude) over-land fiber (on the back end, not to the last mile).

1.9 cents per gigabyte on a very expensive system. Remember that we already baked in a 200% profit margin. But even if you want to get greedy and mark that up an additional 100%, it is only 3.8 cents per gigabyte.

In other words, bandwidth by the gigabyte is incredibly inexpensive. Pennies per gigabyte. And that is on one of the most expensive systems we can imagine.

What’s amazing is that even if you bake in a 300% profit on the most expensive long-haul imaginable, the actual cost is still only around 2-5% of the overage charges ISPs want to rake in per extra gigabyte.

In other words, a co-op ISP could charge $20 per month for 50mbs symmetrical and make a tidy profit for re-investment in future upgrades. And don’t tell me it’s impossible as other countries and their ISPs already do just that. A 1Gbs connection (20 times faster than the 50mbs link) in Sweden for instance is around $25 per month.