There are a lot of critics out there and some of them are voicing their opinions about our business model. I’m all for ‘freedom of speech’, but making assumptions and asserting them as fact is rarely a wise thing to do.
We’ve seen posts on various forums where our critics claim the following:
- It is impossible to purchase bandwidth for $3.99/mbps
- It is impossible to back-haul bandwidth to our flagship data center in an affordable way
- Our business model is doomed as a result of our ‘buying high’ and ‘selling low’ and therefore Uber Bandwidth won’t be around for very long
Please allow me to clarify how we can not only offer bandwidth for $3.99/mbps, but how we offer first-rate bandwidth for this price by addressing the three claims above with as much detail as our CEO and network security folks allow.
1. It is impossible to purchase bandwidth for $3.99/mbps.
That was true a number of years ago, but it is no longer the case. I remember when I first started out in the business back in 1999, bandwidth could be purchased in ‘wholesale’ quantities (usually at least a fully committed GigE) for $65/mbps. We thought that was a very competitive deal. Today, that is definitely not the case… especially when several things are in place.
a) We pick up bandwidth at the source,
b) We purchase a very large quantity and agree to burst at a premium rate.
By simply purchasing a ‘port’ from the provider, they don’t have to run any fiber. That saves them money. By committing to a large quantity of bandwidth (usually at least a GigE, but in our case as much as 10G) you actually can get a very low price.
It might be hard to prove that we actually pay less than $3.99/mbps without showing you an invoice (which I’m not permitted to do), but here is an example. If you go to Cogent’s website (http://cogentco.com), you’ll see right on their home page that they offer bandwidth for $4/mbps. We don’t use Cogent right now (that’s a topic for another discussion), but they are considered a major player. Other providers, such as Level(3) or XO, are happy to match or even beat a price on an equal commit. We’re finding that no provider wants to lose business to another, and that’s helping us pass significant savings to our customers. The key is getting a ‘port’. As we move more traffic over the coming months and years, prices will only go down more as the industry changes and our buying power increases.
2. It is impossible to back-haul bandwidth to our flagship data center in an affordable way.
It is true that our flagship data center is not close to any major carrier hotels. That was a design requirement in order to increase the geographic security of our facility. This is why we already contracted for fiber from 56 Marietta St. in Atlanta to our location (about 200 miles). We’re actively doing the same with other carrier hotels north of us too in order to create network diversity, but we’ll discuss that in another post later.
Some of our detractors state that it can cost as much as an additional $5/mbps to lease dark fiber and that a wavelength is also very expensive. To the former (dark), absolutely. There are very few providers today who will give you dark fiber, and for good reason. Once you give a strand of fiber away, it’s hard to get back. And, the reason they don’t want to give it away is that they can make a lot more money if they put electronics on it and sell you a wavelength (10G). This is due to the fact that advancements in transmission technology such as DWDM (Dense Wavelength Division Multiplexing) increase the capacity of existing fiber by 40 or 80 times. What a fiber provider could sell as a single as ‘dark fiber’ can now be sold over and over again as ‘lit fiber’ in ‘wavelengths’ which means prices can be lowered to gain more market share and acceptance. This is what we buy, and with 96 strands of fiber into our building, a number of them go to 56 Marietta St. where we can pick up transit. Again, I can’t show you an invoice, but with the surprising number of fiber providers in our area competing for our long-haul business, we’ve been able to bring the cost of straight transport to well below $1/mbps. This number will go down as well as we move more traffic.
3. Our business model is doomed as a result of our ‘buying high’ and ‘selling low’ and therefore Uber Bandwidth won’t be around for very long
I hope I’ve given you enough information in the above two points to help you conclude that we’re buying and transporting bandwidth at very competitive rates at least equal to what we’re selling it for. Let me throw some more information at you.
Our parent company, Netriplex, has profitably operated datacenters in the U.S. and U.K. for many years. We have some experience under our belt and we really do know what we’re doing. We make very careful decisions when assessing growth or new opportunities. Any larger data center operator will tell you that when it comes to bandwidth, every customer doesn’t use what they have fully committed to at the same time. This isn’t as much the case with smaller facilities, but when you move more than 5G of traffic, this does become very apparent.
For example, if I sold 50 customers a fully committed 100mbps connection, would I be moving 5G of traffic all the time? Definitely not. In fact, our almost 9 years of experience has given us some data that actually indicates that with the above example, we might (on average) actually peak out at less than 2G. Uber Bandwidth will probably make that number higher since we attract high bandwidth users, but we’re pretty sure it will remain true to some degree.
Does this mean we have oversold our network? Not in the least! (I thought I better pre-empt that question.) It does mean we’ve committed to purchase less transit from our providers which reduces our bandwidth costs, but just like many of our customers, we have high burst capability so that if for some bizarre reason every customer who ordered 100mbps (or 1000mbps, for that matter) used it to the fullest at the same time, we’d have plenty of room to give everyone what they paid for (and then some!).
Of course, you’ve now figured that if we actually use less than half of what we sell, we stand to make at least $8/mbps instead of $3.99. While that is actually quite true (and while you might now feel upset that other data centers are making more than you thought), there is a lot that goes behind the scenes to make the network run smoothly. Redundant Cisco gear, IPS and FCP devices all cost hundreds of thousands of dollars to purchase. They also require us to have pretty brilliant (and expensive) geeks on hand to keep them purring, so in the end, you’re still getting an Uber deal.