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guppy_fish
Premium
join:2003-12-09
Lakeland, FL
kudos:3
Reviews:
·Verizon FiOS

Verizon doesn't pay for bandwidth

Verizon, being one of the 5 main tier one internet providers doesn't pay others for bandwidth, unlike the cable company's that do. So they can provide literally unlimited bandwidth if they want with no added cost, a real cost and marketing benefit.

Verizon of course has to keep up with capacity, but going 100% fiber and being paid by other is very different that what the cable company's have to pay for.

I also see streaming video has a threat to cable, as VOIP is to POTS ... what goes around, comes around

NOCMan
MadMacHatter
Premium
join:2004-09-30
Colorado Springs, CO

1 recommendation

Re: Verizon doesn't pay for bandwidth

Wrong. Even TW and Comcast have "Transit Networks" and recoup some costs through "peering agreements"

The premise that a Teir 1 provider does not pay for bandwidth is absurd. First they're the ones shelling out billions of dollars a year to keep the backbone up and running. This is world wide and not limited to America. Both AT&T and Verizon have international networks they maintain.

Secondly the cable companies pay between 2-5 cents per gigabyte of traffic they pass depending on where it goes etc. Even customers who run up 2 TERABYTES a month would only cause at most 14 dollars worth of bandwidth charges.

These high usage customers are using 70 and 80 dollar pricing tiers. I find it absurd that a cable company would do anything to run them off. As a investor I can see my money is better off with a telco who knows how to invest in their network and knows how to spell capacity planning.

However in defense of the cable companies I will say this. The *PAA's have failed you. Instead of investing in new distribution and production models to advance the accessibility of content consumers are faced with a plethora of expensive and redundant devices to access "Blessed Content" The old models do not fit our busy lifestyles and entertainment has become more on demand. I have over 500 dvd's on my wall and I'd shell out a lot of money if I could just point and click to watch any of those dvd when I want.

Only as long as the costs make sense. Putting a few thousand titles online and charging 4 dollars per rental only slows profits. Put EVERYTHING you can online and charge a dollar per rental with reasonable time limits and the money will flow.

sporkme
drop the crantini and move it, sister
Premium,MVM
join:2000-07-01
Morristown, NJ

Re: Verizon doesn't pay for bandwidth

said by NOCMan:

Wrong. Even TW and Comcast have "Transit Networks" and recoup some costs through "peering agreements"
The cable operators have NOTHING compared to everyone VZ has bought. The MCI/UUNet business alone is huge, and they are selling into businesses at business rates. The cablecos have nothing that comes near to that scale.

VZ will cap and throttle soon enough. Wait for all the P2P users to move over and for the network to have a serious footprint and they will come to the same conclusion - if they can't own the internet, they can at least bill for it.

espaeth
Digital Plumber
Premium,MVM
join:2001-04-21
Minneapolis, MN
kudos:2
said by NOCMan:

The premise that a Teir 1 provider does not pay for bandwidth is absurd. First they're the ones shelling out billions of dollars a year to keep the backbone up and running. This is world wide and not limited to America. Both AT&T and Verizon have international networks they maintain.
I think there is a misinterpretation being made here; Tier1 providers don't pay each other for transit. The defining criteria of Tier 1 providers is that they don't pay for transit to reach any destination on the Internet off their network -- they have settlement free peering with interconnections made for mutual benefit rather than on-the-books financial gain.

That said, you are absolutely correct that Verizon gets paid by customers of their network, including the FiOS broadband division which has an internal chargeback for backbone bandwidth.

said by NOCMan:

Secondly the cable companies pay between 2-5 cents per gigabyte of traffic they pass depending on where it goes etc. Even customers who run up 2 TERABYTES a month would only cause at most 14 dollars worth of bandwidth charges.
This is only true of upstream circuits where you can get OC-x / GigE / 10GigE circuits using commodity hardware (read: cheap) from upstream providers. Transmission in the field ends up being more expensive. Cable companies have limited frequency spectrum to work with, and current node positions are fixed with mid-leg splits being an expensive ordeal of trenching fiber and splitting the physical plant. With a limit of 45mbps down and 10/27mbps up (DOCSIS 1.1/2.0), economics 101 tells us this shifts the supply curve in the unfavorable direction and causes unit prices to increase. On the head-end your ISP can pay a couple grand and get a new GigE termination circuit dropped in without trouble. If a node becomes saturated and cannot be split at the physical location anymore, that involves a node add which could run from 5 to 6 figures just to get a couple more 45mbps channels. These limits make bandwidth on the last mile much more expensive. Verizon has the same issue with FiOS, only their limits are at a much more favorable 622mbps in BPON networks. Still, the day they need 623mbps in that neighborhood they only have expensive options to get there.

Verizon is playing this bandwidth game cool right now because they need to. FiOS is their answer to declining copper access circuits, and a way to get them in on the more lucrative triple play services. More importantly, FiOS is going into existing markets, so they need to be the wonder boy to get people to switch. You can bet that Verizon has been watching the effects on consumer perception as news has come out about Comcast throttling P2P and TWC talking about the move to usage-based billing. The last thing they need is people in their expansion areas thinking "If I'm going to be limited by FiOS or my current cable co, I might as well just stick with what I have" Eventually Verizon will be out of their aggressive subscriber acquisition mode and they'll start to realize that eating losses on their high volume customers isn't worth it from a public relations standpoint anymore. We've seen this play out in other industries. Remember when SprintPCS first came onto the wireless market when analog was king? Remember how they had first incoming minute free and no contracts? Once they got a foothold in the market it was back to business as usual, and you can bet this will be the same story with Verizon in a few years.

RARPSL

join:1999-12-08
Suffern, NY
said by NOCMan:

Wrong. Even TW and Comcast have "Transit Networks" and recoup some costs through "peering agreements"

The premise that a Teir 1 provider does not pay for bandwidth is absurd. First they're the ones shelling out billions of dollars a year to keep the backbone up and running. This is world wide and not limited to America. Both AT&T and Verizon have international networks they maintain.

Secondly the cable companies pay between 2-5 cents per gigabyte of traffic they pass depending on where it goes etc. Even customers who run up 2 TERABYTES a month would only cause at most 14 dollars worth of bandwidth charges.

Peering Agreements only cost if there is an imbalance between the the level of traffic you are sending and receiving. The usual case is that you do not actually pay to peer. The 2-5 cents per GB comes into play if you are sending more than you receive. IOW: The traffic leaving your network to flow over your peer's is more than the traffic that your peer sends to your network. You pay for all the outgoing traffic but get a credit for the incoming traffic so the two charges balance each other and there is no net charge.

The whole idea of peering is to offset the cost of carrying your outgoing traffic by being paid for the incoming traffic.
patcat88

join:2002-04-05
Jamaica, NY
kudos:1

Re: Verizon doesn't pay for bandwidth

There is also the requirement of interconnecting at multiple point/sites across the USA/world, which means you have to have your own national backbone fiber links, also there is the requirement that you take your traffic at whatever site the other provider gives you the pack at (to prevent/avoid from using their long distence POP to POP lines).
bunklung

join:2002-07-13
Northampton, MA
said by guppy_fish:

I also see streaming video has a threat to cable, as VOIP is to POTS ... what goes around, comes around
Very very well said.