An Attempt at Economically Rational Pricing: Time Warner Trial

michael.dillon at bt.com michael.dillon at bt.com
Fri Jan 18 21:16:36 UTC 2008


> The problem in the ISP industry isn't lack of usage based 
> pricing. It's that the going rate for basic connectivity was 
> driven below that which is economically sustainable by the 
> ILECs when they engaged in predatory pricing to drive the 
> CLECs out of business in the late 90s. Now that they own the 
> market, they find that, having driven the prices down, they 
> can't raise them, so they are engaging in various subterfuges 
> that are designed to cover up the basic thing they are doing: 
> trying to charge more for the exact same service.

Sooner or later, somebody is going to try to apply Google's 
approach to hardware in a network backbone. Imagine a network
backbone with no Cisco or Juniper boxes in it, just lots of
commodity boxes with triple-redundancy everywhere (quintuple
in NFL cities). 

Vadim Antonov tried to build something like this into a backbone
router, but the market for IP backbone equipment is so incredibly
conservative, and the pricing was up there with the big boys, so
he never had a chance at it.

I don't know if Google is doing something like this between their
data centers, but I think that the fundamental price of fiber is
low enough that with commodity router/switches and triple the fiber
miles, we can have a reliable IP packet moving service without
jacking prices up.

Even if prices do go up, it will be a short term thing because
sooner or later, Google, or somebody who thinks as bold as they
do, will build a true commodity packet-moving service, and  the
telecoms industry will fall back into the razor-thin margin
utility sector where it belongs.

I'm sure many of you will think I am crazy because you know just 
how much those high-speed ports cost and you can't see any letup
in bandwidth growth. But the fact is that ports are not the fundamental
components of routers. Chips are, and as we all know, chips keep
getting smaller, cheaper, faster and more powerful. FPGAs, SOCs,
multicore CPUs and so on. The company that cracks the Internet 
utility problem might even design and build their own devices rather
than outsourcing that, at a high price, to the benevolent vendors.

--Michael Dillon



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