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YouTube's Bandwidth Bill May be Zero
MrShaggy writes "Credit Suisse made headlines this summer when it estimated that YouTube was costing Google a half a billion dollars in 2009 as it streamed 75 billion videos. But a new report from Arbor Networks suggests that even though Google is approaching 10 percent of the net's traffic, it's got so much fiber optic cable it is simply trading traffic, with no payment involved, with the net's largest ISPs. 'I think Google's transit costs are close to zero,' said Craig Labovitz, the chief scientist for Arbor Networks and a longtime internet researcher. Arbor Networks, which sells network monitoring equipment used by about 70 percent of the net's ISPs, likely knows more about the net's ebbs and flows than anyone outside of the National Security Agency."
The question is, though: To whom would they be selling those gobs of bandwidth? The nature of bandwidth, overall, remains geographically fixed; you can't sell (much) of your bandwidth capacity in the united states to a company in Japan; they still need the pipes going, overall, from Point A to Customer B.
At the volumes in which they are dealing with, they don't really have a lot of customers who can conceivably use that much bandwidth. So it's definitely in their best interests to trade with them preferentially.
If the options are A) Trade to defer costs, or B) Try to sell to others and discover nobody else wants to buy a tenth of our capacity, they'll usually find that A) is a smarter business decision.
"To pass through the jungle; silence, courtesy, ferocity, as the occasion demands." -- Kamau, "Proper Passage"
but the cost of routers and maintenance is nowhere near buying the bandwidth.
Here are some pics of some of Googles hardware. These are a few years old. The power interface is entirely foreign to me.
When I uploaded them to photobucket they were resized and I've since lost the originals, but, if you zoom in close enough you can see that the powersupply has a part number printed on it that includes the word 'GOOGLE', and, the ram also has chips that are individually labeled Google.
Does anyone care to explain to me how it is possible that doing such a thing is more cost effective than just purchasing stuff already on the market in bulk? I've been wondering it for years after seeing this.
http://s38.photobucket.com/albums/e149/drcollinsakatheman/randomjunk/1.jpg http://s38.photobucket.com/albums/e149/drcollinsakatheman/randomjunk/2.jpg http://s38.photobucket.com/albums/e149/drcollinsakatheman/randomjunk/3.jpg
Well, the bill being zero is just speculation from the author of the article. It doesn't imply that there are no running costs providing all of that, but that the bandwidth itself could be close to zero cost if Google is directly peering with other companies (every other article previously assumes that Google is buying their bandwidth). I work at the same place where the main IXP of my country is and while I don't know the details, it's not an uncommon thing with smaller companies either. I'm quite sure there are similar contracts between ISP's and certain big media companies that rely heavily on the Internet as it just makes business sense to everyone. It would be stupid not to use that.
Hell, there are weirder peering contracts too. A good example is that of The Pirate Bay, which has several AS to run their site and provide stable peering. DCSnet, PRQ and other belong all under the same umbrella and by the looks of it, have been improving their contracts with other ISP's to both get TPB to be more stable and maybe also to monetarize their peering contracts with several big ISP's. Remember that they're backed up by Carl Lundström who founded Rix Telecom AB (Port80), and Google also is peering with Port80.
Even when smaller companies are doing that, it would be stupid of Google not to utilize their infrastructure. But I'm quite certain they do, they are a geek company after all, so they must know it.
This is what I am hearing:
One person says Google's bill is zero, because they run the infrastructure themselves.
Another person says Google's bill is not zero because they have to maintain the network.
It's all about perspectives: Do you count internal cost or not in the discussion. Obviously it cost "something" for the infrstructure. Is it a fixed cost internally which can be minimized and absorbed or is it an external bill which can increase significanly as the business expands.
I think the point of the article is to debunk inaccurate speculations from traders who have no technical and real commercial knowledge who may be trying to trash Google's stock for short gain. Not necessarily figure out how many Washingtons Google has to shell out.
Then again, where would be the fun of slashdot if we can't go back and forth on the chicken-and-the-edd argument...