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worth reading British Telecom says bandwidth costs unsustainable. True?
From: David Farber <dave () farber net>
Date: Wed, 24 Sep 2008 12:43:13 -0400

Begin forwarded message:

From: "Stan Hanks" <stan () colventures com>
Date: September 24, 2008 11:56:54 AM EDT
To: <daveb () dslprime com>, <dave () farber net>
Subject: RE: [IP] British Telecom says bandwidth costs unsustainable. True?


Saw your note on Farber's list. Unfortunately, Ms. Davis is right on. *SOMEONE* has to pay for all this...

Having built a number of big networks (MFS Datanet, Genuity 1st generation, Enron) I can absolutely assure you there is no free lunch. You can cheat a *little* -- a given business case justifies spending $x, but if you spend a modest amount more you get double the capacity (not uncommon) but at no point do you get to "all the bandwidth you can ever imagine using for one low price paid today".

When we build the Enron network in 1998, we laid 2 conduit, and pulled a single cable of 144 fiber in one of them. That meant we had upgrade capacity of pulling an additional two cables of 144 fiber in the first conduit plus pulling another three in the second. The cost for the original build was about $150k/route mile. The cost to pull each additional cable was about $50k/route mile (unless you pulled more than one at once, in which case the cost of the next one went down to about $15k/route mile).

OK, let's talk about what that means... of the 144 fiber, you only use *TWO* per route, one send, one receive, to go into your DWDM gear. One one route, the Portland-Boise-Las Vegas-Los Angeles route, we spent over $35mm to light 20 channels of 2.5 Gbs, and would have spent another $20mm to light the remaining 20 channels available in that technology footprint.

Toni Mack at Forbes did an article around that time period on the economics of networks (Mack, Toni, 'Empty Pipes,' Forbes, November 30, 1998, p. 76.). If I recall her numbers correctly, she pointed out that to acquire an "NFL cities" network, the roughly 25,000 route mile with six strands of fiber (enough for one running system and four spare fiber for upgrades or emergencies) would cost about $150mm, but to light it to full capacity would cost over $5B. Yeah. Billion.

Today, 2.5Gbs is passé, and you'd be insane to light less than a 10Gbs system today. 80Gbs is possible in some areas, but still not cost effective. And you can get 80 channels typically, so instead of a 2.5x40 system per pair a decade ago, you can get 10x80 today. And the equipment costs have roughly halved. Moore's Law, if you will.

And we're still just talking about *TRANSPORT*... you still have to add routers to that in order to build big IP networks. Alas, the crash in 2000/2001 cost us our best opportunities to do that cost effectively -- Hyperchip, Pluris, Avici, Procket are all dead, or effectively dead. Juniper and Cisco are still locked into a "small box" mentality where you burn over half your front-side interfaces to build meshes to support your line side interconnects. And that's before you get to aggregation and distribution networks. It's just *ugly*...

And then you get to manpower, and nothing is cheap there. And the true rocket scientist guys in building and running big networks? They're all retired, having either made enough in the boom to go fishing for the rest of their lives or having just flat burned out...

Plus even if you pull that off, you *STILL* haven't solved the problem of interconnect with the rest of "The Internet" -- and the rules have changed there dramatically. Instead of "Free Peering", it's all about parity and advantage. If I don't have something you need, you typically charge me to take my traffic. And even at the most aggressive wholesale rates, that's expensive -- rock bottom market rates are in the $4/Megabit range, and go up from there depending on volume and how much "pull" you have to offset the "push"...

Back in about 2002 or so, Gordon Cook did a Cook Report on the economics of big IP backbones, and concluded that even though no one was actually confirming it, that there was zero money to be made as a core IP network backbone operator.

Having spent the majority of my time since then looking at "busted companies" and trying to figure which ones are worth trying to turn around and which should just be broken up, I have to say that he was pretty much right. The *LAST* thing in the world I'd sign up for today is being a broadband Internet service provider. There's just no money in it.


-----Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Wednesday, September 24, 2008 12:11 AM
To: ip
Subject: [IP] British Telecom says bandwidth costs unsustainable. True?

Begin forwarded message:

From: Dave Burstein <daveb () dslprime com>
Date: September 23, 2008 9:33:28 PM EDT
To: dave () farber net
Subject: British Telecom says bandwidth costs unsustainable. True?

Sally Davis at BT just gave a speech (below) saying BT might have to
block the iPlayer and other Internet video because their bandwidth
costs are unsustainable. Other carriers, like Verizon, say they have
no problem handling the video load, nor expect to have a problem. So
I'm sending her comments over to see if anyone can provide evidence on
why BT's experience is different or that Davis' comments are unproven
hyperbole. It's especially surprising to hear BT's 21st Century
Network, (superbly designed by superb engineers) is inadequate. Key
competitor Sky just pulled off all limits on their $20 broadband
service, saying,"it had invested in creating 'a high-capacity network
that is designed to carry huge amounts of traffic without congestion'"
without traffic shaping. I've written BT to doublecheck the reporter
got it right, but the quotes are pretty clear.

   So am I missing something unique to the UK, or are Ms. Davis'
comments unfounded? Facts welcome.

Wholesale giants say Internet will no longer be free
... the answer could be to restrict "free" access to services like the
BBC's iPlayer that allows users to stream BBC TV content over the
Internet ... "One thing keeps me awake at night. In the immortal words
of Jerry McGuire 'show me the money!'," said Sally Davis, CEO of BT
Wholesale. ... Today there are a number of unsustainable business
models out there, and these need to change, Davis insisted.
... the ISPs are saying "I can't keep increasing the bandwidth for no
more money," Davis said, a situation that will ultimately lead to ISPs
adopting traffic shaping measures and the like to keep control of
bandwidth usage on their networks. ...
"We're going to have some very grumpy people," namely the content
owners and end-users, said Davis.
As such, "we have to find new ways around it... Content distribution
models will play a role in that," Davis said. "We will see those
business models emerge," but more work needs to be done, she cautioned.
... "In the next three years... we will see some different models
emerge," said Davis, a prediction that was greeted with some
scepticism from others in the auditorium.

There won't be just one model, "there will be room for many models,"
agreed Kathryn Morrissey, EVP at AT&T Wholesale.

"Somebody at some point is going to have to pay for [this network
usage]," she said.


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