Reporter's questions

Fri Apr 29 02:25:45 UTC 2016

Folks

I've long lurked here and thought to ask about the story below and related.

The news here is that Hurricane Electric is opening Africa pops and likely
bringing down prices significantly. I made some (semi-informed) guesses
about the relation of backhaul/transit to ISP costs. Anyone with date, I'd
welcome it on or off list.

Also, pointers to other sources of attractive pricing in the Global South
welcome. I've been to several international meetings where I hear that's a
huge problem.

Improvements welcome. I'm always looking for news about broadband and
related policy. I've just been to a major 5G conference and have been
learing a great deal. Quick takeaways:

Field trials coming next year at both Verizon & AT&T. Test data so far is
very positive.
MU MIMO should be ready for market this decade, with 10x improvement in the
right places. Millimeter wave is also looking good but few expect volume
before 2020-2023. Very expensive because short range of high frequencies
means many, many cell sites.
Short range means that those with fiber in place for backhaul have an
enormous advantage. That's mostly the incumbents. I believe this will be a
huge problem for competition but DC hasn't caught on yet.

If any of this isn't appropriate for the list, let me know.
Dave Burstein

http://fastnet.news/index.php/97-fnn/368-hurricane-s-incredible-backhaul-prices-to-joburg-nairobi-could-kickstart-africa-s-internet
Hurricane's Expected Incredible Backhaul Prices to Joburg & Nairobi could
kickstart Africa's Internet
<http://fastnet.news/index.php/97-fnn/368-hurricane-s-incredible-backhaul-prices-to-joburg-nairobi-could-kickstart-africa-s-internet>

[image: Hurricane Africa 250]Not quite as low as the $0.27/megabit price in
Riga. Hurricane Electric, a major Internet backbone, is coming to Africa.
Although they aren't announcing prices, I predict they will offer much less
expensive backhaul/transit. Most of the continent suffers from brutally
high, cartel-like prices for wholesale connections. If HE prices as I
expect they will, that could easily reduce consumer Internet prices by 15%
to 35%. In turn, that will allow tens of millions more to connect.

In 2012 at the WCIT, a dozen Africans told me the high the cost of
transit/backhaul was by far the most important international obstacle to
bringing the Internet to more Africans. A friend of mine was quoted
$70/megabit for a Gig-E in Lagos last year. The cost in most European or
American cities would be between $0.50 and perhaps $4.00. The current high
price of backhaul raises the cost of a robust broadband connection probably
$10-20 over what it could be.  Even a second-rate service with a low cap is
probably $5 more expensive than necessary.

There is a real cost involved carrying data 6,000 miles undersea but that
explains only a small part of the 50-1 difference in the price between
London and most of Africa. Most coastal countries are now served by more
than one undersea cable.

South Africa has five and Kenya three, Take a look at Steve Song's remarkable
map.  <https://manypossibilities.net/african-undersea-cables/>The Africans
have been chomping at the bit to reduce the impact of the cartel, but the
U.S. has been blocking that at the ITU.

Hurricane offers a $2,700/month price for a 10 gigabit pipe in several
dozen cities in Europe and North America, including Riga, Latvia and
Rochester, Minnesota. That's on a five year contract. Three years would be
somewhat higher. The Africa price will be higher but I believe will create
a new market level. The cable middleman must be paid. A Gig-E can serve a
thousand robust connections and easily five thousand with low caps. 10 gigs
is enough for ten thousand good connections.

HE keeps prices down by doing little advertising and less pr and run lean
in all ways. They;ve been around since 1994, were early to IPv6 and other
technical advances, and service many world-class clients.

The ISP needs to carry the data from the Hurricane POP to their local
networks. Fortunately, land-based fiber nets are growing rapidly. With 700M
mobile subs in Africa, the market is booming. Afterfibre has a map
<https://afterfibre.nsrc.org/> worth looking at.

Africa will have more than 315M broadband users, the population of the
United States, within the next 18 months. Ericsson expects a total of 500M
new broadband users in Africa between 2015 & 2020.

A bit further - All cost figures here other than actual price quotes are my
somewhat informed estimates based on scattered details of actual ISP
internal costs I've accumulated over the years. They aren't precise. Cost
accounting in a high fixed cost/low marginal cost industry is highly
subjective. That's especially true here because the decision how to
allocate backhaul costs between voice and data varies. Also, expect a lag
between the wholesale and retail price changes.

In developed countries with typically robust regional fiber, a large
carrier's network cost from the peering point to the local exchange was
similar to transit costs. Both seem to typically equate to 3-5 hops worth
of switches/routers. So if I double transit costs, which have a competitive
market, I get a usable estimate of the marginal cost of the bandwidth
delivered to the local exchange. If transit costs $0.27/megabit in the
local market, I believe the marginal cost of bandwidth will be well under
$1. That's confirmed off the record numerous times by the carriers but very
rarely discussed in public. (Because bandwidth is such a small part of
broadband costs, any policy discussion that focuses on how much bandwidth a
consumer takes is unsound.)

However, as I testified to the U.S. Broadband Commission, rural areas and
small companies often have much higher costs. ISPs and telcos under ~
20,000 customers cannot efficiently buy backhaul in many locations. (That's
when I developed some rules of thumb between transit costs and the
delivered cost of broadband,) I suspect the effect is even more extreme in
African rural areas or where customers are relatively few. I'd welcome any
data people might have.

-- 
Editor, Fast Net News, Net Policy News and DSL Prime
Author with Jennie Bourne  DSL (Wiley) and Web Video: Making It Great,
Getting It Noticed (Peachpit)