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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."
I really don't see why Google would be paying much. It seems the guy who wrote that article now discovered how peering works.
Routing graph for YouTube AS
Routing graph for Google AS
YouTube alone has direct peering contracts with AT&T, RETN, TINET and via Google AS with Net Access, NTT Communications, Telia, Level3, SIG, Sprint, Global Crossing, MFN, Cogent, Port80, Internet2 and AOL.
Depending on the terms, it means Google can also act as a peering or transit point between these companies and or even have an IXP's at their locations, so theres incentive for ISP's to sign up beneficial transit agreement, especially considering Google has data centers around the world. Google has more power than Tier 1 ISP's alone. The article's note about "serving customers YouTube faster" is a moot point - Google's infrastructure and routing contracts alone act as a great incentive for ISP's to make a peering agreement with Google.
Epic. Fail.
If you were blocking sigs, you wouldn't have to read this.
"This Win7 PC cost $300. On the other hand I still owe you $299 for that RTF model airplane you gave me last month. How about we just call it even?" - me
"Deal." - brother
It sounds like Google and the ISPs have the same arrangement.
"I disapprove of what you say, but I will defend to the death your right to say it." - historian Evelyn Beatrice Hall
Google already ran the fiber for other purposes. So that cost was already planned for, well before they acquired YouTube. So, yes, it cost them nothing extra.
Owning and maintaining all that fiber is costing Google money. Even if they are not paying anything to other providers for handling YouTube traffic it is using bandwidth on their own fiber that they could otherwise sell or use for something else.
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
The Wired article is from last fall. Arbor's blog post this week by Labovitz has better information. The most interesting data is a chart showing how 60 percent of Google's traffic takes advantage of direct peering, up from 40 percent a year earlier. Given the volume of traffic, we're talking about, there's some meaningful economics in that change.
RichM
Data Center Knowledge
Suppose Google had all that stuff but not YouTube. It would be selling services to YouTube.
...
It's not so much the cost to run their own fiber (marginal cost), which could be very low. The relevant cost here is opportunity cost; they could be charging other content providers to use that fiber and the revenue they're giving up is the real cost of using it for their own content.
There's a reason the concepts of scarcity and opportunity cost are introduced in the first lecture of every Econ 101 course that I know of. Too bad the concepts don't stick!
Imposing Libertarian views on everyone online since 1992.
If they weren't using it for Youtube they could leave it dark, saving power costs, or deferring future expenditures, or provide transit for other companies and receive income from them.
because i don't ride in other people's cars, my car costs are zero
except for car payments, financing, gasoline, repairs, insurance, inspection, registration, tolls, oil change...
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
.05Mbps = 50kbps. Sound familiar? He means dial-up! I'll be here all week for simple math help.
fiber cost don't go in the same column as bandwidth cost. Accounting solves it again.
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
Almost all companies lease their offices. They could buy them and save rent. It would possibly be cheaper. They don;t though. They don't want all that capital tied up in property. They can use it for business expansion instead.
So Google owns a bunch of fibre. This has a capital cost. That's money that could have been invested somewhere else, so it's not free. They could have leased the fibre from a third party. Presumably they worked out that it would be cheaper not to do this. They could probably have saved money by leasing bandwidth from a third party. The third party would then be able to amortise the costs over several customers if there's surplus bandwidth. Having capital tied up like this isn't "free".
It points out the folly when people say "Comcast/AT&T/Verizon/whomever has to pay huge upstream bandwidth costs, bandwidth isn't free y'know!", and it always gets marked as insightful.
These guys are so large, bandwidth, other than physical maintenance of their physical plant, isn't a big part of their expenses. When Comcast says "We need to limit bandwidth because of those evil hackers", that's code for "I don't feel like rolling out DOCIS 3 for a few years". When AT&T Mobile says "Those iPhone users are sucking up all the bandwidth so we have to limit you", that's code for "We dont' want to upgrade our cell towers".
People still have this picture in mind of a tier-1 provider asking their local LEC to run a couple DS-3's over to their data center. It's such a 1992 view of how ISPs actually work.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
You guys are looking at this from a completely different angle than a business person would. Google has that fiber REGARDLESS of YouTube's existence. It has that fiber to run its core business, advertising. Therefore the cost of maintaining the fiber is a cost to Google's advertising business. Furthermore, the cost of laying the fiber has (likely) already been paid and is no longer considered a cost but a capital investment.
Therefore, since the YouTube division is not paying for the fiber to be laid and is not paying for the fiber to be maintained, YouTube could have $0 bandwidth cost to Google.
Sorry to reply to myself but there is only an opportunity cost in using this bandwidth if the bandwidth would otherwise be used. If they are not at capacity along their fiber then there should be no opportunity cost either.
If ISPs are willing to give Google half a billion dollars a year of traffic in exchange for Google giving them some equivalent value of traffic on its own fiber, we should at least consider the possibility that Google could otherwise sell that traffic. Our best guess for the opportunity cost might still be half a billion dollars.
"I zero-index my hamsters" - Willtor (147206)
Once again, the Slashdot title has got it wrong. TFA doesn't say that Google's overall cost for bandwidth is zero, simply that their transit costs are near zero, which specifically refers money paid to a network provider to carry your traffic.
More accurately, this is like saying "I don't own a car, so my petrol costs are zero"
how was this modded up? it's because he makes fun of the parent isn't it. but that metaphor doesn't work at all.
neither the parent do anything to illuminate the article, both seem to be confused.
and they're both modded +5 Insightful.
It breaks my pluginses, my precious!
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...
Luckily, Google's fiber infrastructure is "free" - they don't pay for right of way, to maintain the connections,oversee the network, etc...
These really silly interpretations of "analysis" by financial folks is pretty amusing, actually - I suspect the report actually said something like "ignoring the deployment and on-going costs of their infrastructure Google has essentially free internet access"...
Do they think fiber, routers, switches, networking professionals, and right-of-ways are "free"?
Ken
They didn't lay the fiber--they bought it. Before YouTube came into existence.
And they bought them with pennies on the dollar as well.
Carefully read the TITLE of article... Staring at you from the browser toolbar right now. Take note that it DOESN'T say Google's Bandwidth Bill May be Zero. "Google" isn't in there at all.
But you might just see YouTube in there...
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
But it is not like bandwidth itself costs money. It is always the infrastructure that you are paying for. You can either outsource network building and maintenance to a third party, or you can do it yourself.
It is no different than Google having lawyers and accountants on staff, while smaller companies only hire those people when needed. It is more cost effective for the smaller businesses to only pay for what they use, but larger companies are not bound by those same limitations. I am sure that Youtube does not pay any lawyer firms for any legal issues that arise within their operation also.
No, you're failing to see an important distinction. The network infrastructure is a fixed cost, but the cost of using the network is not the cost of the network infrastructure; it is the price that the market would pay for transit on that network. Every time Google transmits their own data over their fiber network, they had the alternative of selling that bandwidth to somebody else as transit. The price that they could have obtained from that sale is the cost of that bandwidth.
The point is that when analyzing the cost of their network, you should really think about what the value of the bandwidth of the network is, and compare it to the revenue that they obtain from using the network. If the revenue over the long term turns out to be less than the market value of the bandwidth, then they're better off selling the bandwidth.
Are you adequate?