YouTube's Bandwidth Bill May be Zero 188
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samzenpus
from the self-sustaining dept.
from the self-sustaining dept.
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."
It's obvious (Score:5, Insightful)
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 [robtex.com]
Routing graph for Google AS [robtex.com]
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.
Yes, because Google's fiber costs nothing to run! (Score:4, Insightful)
Re:It's obvious (Score:5, Insightful)
Unless you count the cost of running the fiber, and the cost of routers and maintenance. And the cost of generators, and power and other operating costs... Basically, "much" is relative. Compared to "buying" the bandwidth from a Tier-1 provider, probably not much. Compared to 0, probably very much...
Re:Yes, because Google's fiber costs nothing to ru (Score:4, Insightful)
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.
Payments are not the only costs. (Score:5, Insightful)
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.
Re:It's obvious (Score:4, Insightful)
If the bill is zero, they're not making much either. It's a money game sure enough, but if they were making money, then the article would be about their profit from peering youtube's backbone to other providers. With the introduction of the new cisco switches/routers, and if the dark fiber is in appropriate places to do so, it's entirely possible an infrastructure upgrade would permit them to do this. However, that's doubtful. Google will almost always run at a break even, I should think, opting to send more data rather than transmit data across their networks.
Granted, I'm not a major ops center manager for a Tier1, so I really can't say for sure. Making money is always nicer than losing it, I hear.
Re:Vertical Integration (Score:4, Insightful)
Suppose Google had all that stuff but not YouTube. It would be selling services to YouTube.
Re:Yes, because Google's fiber costs nothing to ru (Score:4, Insightful)
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!
It still costs money to run. (Score:4, Insightful)
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.
by that logic (Score:4, Insightful)
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...
Re:Yes, because Google's fiber costs nothing to ru (Score:3, Insightful)
Re:by that logic (Score:5, Insightful)
More accurately, this is like saying "I don't own a car, so my petrol costs are zero", and everyone in the comments going "But that doesn't include your bus tickets or the time you spend walking!", and completely missing the point.
Buying rather than leasing costs money. (Score:4, Insightful)
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 also points out the folly (Score:3, Insightful)
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.
Re:Yes, because Google's fiber costs nothing to ru (Score:4, Insightful)
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.
Re:It still costs money to run. (Score:1, Insightful)
Dark fiber isn't cost effective either.
Re:by that logic (Score:4, Insightful)
The same thing works with Google and YouTube. Compared to the whole cost of running Google, the cost of YouTube is little more than a rounding error, and odds are it is comfortably hosted in 'extra' space and run on 'extra' bandwidth that isn't needed right now, but has been paid for already, so it's basally 'free'.
Opportunity Cost (Score:3, Insightful)
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.
Re:It still costs money to run. (Score:3, Insightful)
It's a sunk cost, and leaving it dark is cheaper than lighting it up.
Re:Buying rather than leasing costs money. (Score:3, Insightful)
It is like there are two parts to Google the tier 1 ISPs and the data center company. With a company like this the risk of running out of bandwidth budget is huge so it is safer for them to have a contract that in effect gives them unlimited bandwidth when they need it. Even if it does cost them more in the end then using providers for each site.
Re:It still costs money to run. (Score:3, Insightful)
It's a sunk cost, and leaving it dark is cheaper than lighting it up.
Not if lighting it up means savings on other part of your operation.
Re:It also points out the folly (Score:1, Insightful)
But physical maintenance will be a large part of where bandwidth costs derive from surely? There's no law of physics that says bandwidth costs money - its the hardware, maintenance, and salaries of the people who purchase/maintain it that give rise to the costs. So bandwidth isn't free to Google in exactly the same way it isn't free to the home user - it's just that the user never sees the cost breakdown.
Re:This was shocking to me (Score:4, Insightful)
When you have as many servers as google, the bulk order is big enough to go direct to the manufacturer skipping all the middle men (and their markups).
Re:It also points out the folly (Score:4, Insightful)
The problem with this argument is that these guys' physical maintenance bills are significantly higher than most everybody else's. We may quibble whether this counts as an upstream bandwidth cost; it's upstream from the customer, but not from the ISP. But even in the second case, strictly speaking, peering is basically buying some of somebody else's bandwidth and paying not with money, but with some of your own bandwidth. But you still have the costs incurrent in delivering that "payment."
Re:It still costs money to run. (Score:3, Insightful)
Yes, but if you can offset higher costs by lighting it up and get a return on the sunk costs, it would be silly to not do it.
It's still proper (if over-simplified) to say that the bandwidth bill is zero, nobody's billing them for it and there's no meter.
Re:Yes, because Google's fiber costs nothing to ru (Score:3, Insightful)
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.