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YouTube's Bandwidth Bill May be Zero

samzenpus posted more than 4 years ago | from the self-sustaining dept.

Businesses 188

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."

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188 comments

It's obvious (5, Insightful)

sopssa (1498795) | more than 4 years ago | (#31522966)

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.

Re:It's obvious (4, Insightful)

ircmaxell (1117387) | more than 4 years ago | (#31523002)

I really don't see why Google would be paying much.

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:It's obvious (0)

sopssa (1498795) | more than 4 years ago | (#31523068)

It's relative of course, but the cost of routers and maintenance is nowhere near buying the bandwidth.

Also if Google is wise, they're generating income on their infrastructure too. Who says some of their peering contract isn't actually buying bandwidth from Google?

Re:It's obvious (3, Insightful)

drachenstern (160456) | more than 4 years ago | (#31523128)

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:It's obvious (3, Interesting)

sopssa (1498795) | more than 4 years ago | (#31523598)

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 [robtex.com], 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.

Chicken and the Egg (4, Interesting)

denobug (753200) | more than 4 years ago | (#31524154)

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...

Re:Chicken and the Egg (1)

sopssa (1498795) | more than 4 years ago | (#31524204)

But like even the title of the story says, we are talking about bandwidth. That doesn't include infrastructure cost. Just bandwidth which, if Google indeed does peer (and not transit) with all of their network partners, are somewhat zero. Infrastructure costs are an another matter (and would still be there, as YouTube and Google would need to run their network nevertheless)

Re:It's obvious (1)

ircmaxell (1117387) | more than 4 years ago | (#31523168)

It's relative of course, but the cost of routers and maintenance is nowhere near buying the bandwidth.

Those two parts alone, true. But they have to by the right of ways from the power/telephone company (or whoever owns the properties they run their lines over) to run their fiber. They have to pay for the fiber and actually run it. They need to handle breaks and failures of the fiber. For someone the size of Youtube, it likely is much cheaper to build your own infrastructure than buying the bandwidth directly. My guess would be 10's if not 100's of millions of $$$ to build and maintain those systems over the course of a few years. And to most people, that's not cheap (I was just trying to provide a frame of reference for "cheap")...

This was shocking to me (3, Interesting)

floppyraid (1756326) | more than 4 years ago | (#31523438)

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 [photobucket.com] http://s38.photobucket.com/albums/e149/drcollinsakatheman/randomjunk/2.jpg [photobucket.com] http://s38.photobucket.com/albums/e149/drcollinsakatheman/randomjunk/3.jpg [photobucket.com]

Re:This was shocking to me (3, Informative)

amorsen (7485) | more than 4 years ago | (#31523668)

They probably did purchase stuff which is already on the market in bulk. They just asked for it to be labelled Google, so people would be less likely to steal it. Although it's rare to double-sided double height sticks these days -- they must have an awful lot of RAM in each server. Perhaps the modules are actually specially made for Google. I bet the chips themselves are bog standard apart from the label though.

Re:This was shocking to me (3, Informative)

tlhIngan (30335) | more than 4 years ago | (#31523738)

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.

If you're willing to buy a LOT of stuff, parts manufacturers are willing ot customize. (The threshold for "lots" varies).

Intel will sell you a custom spec'd chip if you wanted - only restrictions are it has to be based on a current production model. So if you want an i7 without 64-bit and VT, buy enough chips and Intel will provide it. Hell, if you're Google, they'll probably laser etch Google on it, too.

Power supplies - ditto. Google uses a special arrangement too, so they're probably custom-made. Which is trivial for a power supply company (as they already have lines set up to do custom builds, since 99% of their business is custom power supplies for all sorts of devices).

RAM - buy enough, and the manufacturer can do anything. Laptops often come with "custom" RAM from the OEM (usually just a label slapped on the stick). Given Google's order size, I'm sure the assembler can put GOogle on them. Heck, Apple got custom-manufactured RAM too (Mac Pro FB-DIMMs are custom made to have larger heatsinks).

And yes, Google can order in bulk, but since few can supply the order directly, Google just buys direct - cut out some middlemen, and get customization ability.

Heck, Google might get a custom motherboard too - sure it's based on an existing design, but configured to Google's specs.

Re:This was shocking to me (1)

bhima (46039) | more than 4 years ago | (#31524178)

Google's servers have been much discussed... they are standard (but some things are not populated) and they have an on board battery to act as a UPS.

http://news.cnet.com/8301-1001_3-10209580-92.html [cnet.com]

Re:This was shocking to me (1)

sopssa (1498795) | more than 4 years ago | (#31524248)

Maybe Google servers as in search, but I think YouTube needs different kind of build as they're delivering massive amount of video content instead of doing database queries. I suspect the article is about Google's search servers.

Re:This was shocking to me (3, Funny)

smooth wombat (796938) | more than 4 years ago | (#31523882)

Funny thing about your second pic is if you look at the label on the power supply(?) on the left side of the image, the tag reads:

Safety Test Pending

Re:It's obvious (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#31523474)

Eat shit, asshole!

It also points out the folly (3, Insightful)

tkrotchko (124118) | more than 4 years ago | (#31523502)

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.

Compare it to a new desktop. (0)

Anonymous Coward | more than 4 years ago | (#31523820)

They can put the network at your desk for not "much" -- now, the network _really_ is the computer.

As M$ heavily depends on a computer-maker+them ecology, this makes for somber news...

On the bright side, Ballmer can start a fiber deployment company and finally deliver his promise of burying Google. LOL.

Yes, because Google's fiber costs nothing to run! (3, Insightful)

Rogerborg (306625) | more than 4 years ago | (#31522984)

Epic. Fail.

Re:Yes, because Google's fiber costs nothing to ru (4, Insightful)

serialband (447336) | more than 4 years ago | (#31523088)

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.

It still costs money to run. (3, Insightful)

argent (18001) | more than 4 years ago | (#31523238)

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.

Re:It still costs money to run. (1, Insightful)

Anonymous Coward | more than 4 years ago | (#31523560)

Dark fiber isn't cost effective either.

Re:It still costs money to run. (2, Insightful)

argent (18001) | more than 4 years ago | (#31523794)

It's a sunk cost, and leaving it dark is cheaper than lighting it up.

Re:It still costs money to run. (2, Insightful)

denobug (753200) | more than 4 years ago | (#31524284)

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:Yes, because Google's fiber costs nothing to ru (1)

Rich0 (548339) | more than 4 years ago | (#31523670)

Do you think they would have run all that fiber if they weren't expecting to host a lot of bandwidth-intensive services?

In any case, they're paying for the service. If I own a trash company and give somebody free trash delivery in exchange for free doctor's visits that doesn't mean that my doctor's visits didn't cost me something.

Re:Yes, because Google's fiber costs nothing to ru (1)

sopssa (1498795) | more than 4 years ago | (#31523894)

But in that case it's better for you than not getting the free doctor's visit, which is the whole point. The whole article is talking about bandwidth specifically, not the whole infrastructure costs.

Re:Yes, because Google's fiber costs nothing to ru (1)

Rogerborg (306625) | more than 4 years ago | (#31523700)

So... they diverted capacity from non-YouTube use to YouTube use?

OK, genius. Did they then:

  1. Pay more to lay and maintain extra fiber to support those other activities?
  2. Abandon those activities and give up the revenue?

Y'all wouldn't be an economist by any chance?

Re:Yes, because Google's fiber costs nothing to ru (1)

boaworm (180781) | more than 4 years ago | (#31523844)

With an equally poor logic, if you hire a developer to work on project A, that person can also work in parallel on project B, because it doesn't cost anything!

The "cost" of course has to be divided up based on usage. And if they had excess bandwidth they didn't need (because youtube ate so much of what they would otherwise have), they could have sold it to someone else, making money on it. Money they are now losing.

GP is correct, the conclusion is crap.They may be saving a lot of money, but that's a whole different story.

Re:Yes, because Google's fiber costs nothing to ru (0)

Anonymous Coward | more than 4 years ago | (#31523986)

Actually, I think Google bought up a lot of fiber instead of running their own. I remember some news articles from several years ago talking about Google buying up dark fiber on the cheap after the dot com bubble burst. The speculation was that Google might get into the ISP business.

Re:Yes, because Google's fiber costs nothing to ru (1)

w00tsauce (1482311) | more than 4 years ago | (#31523104)

Seriously. Switches cost nothing, neither do routers! Rack space? ha! Building datacenters? also free. Yup. Google may pay pennies on the dollar because they don't need to buy transit, they can just peer-but there will always be cost involved.It's the same with any industry-uninstall the middleman, and your price goes down. When google becomes the ISP and content host, Companies like level3, cogent become moot.

Re:Yes, because Google's fiber costs nothing to ru (0)

Anonymous Coward | more than 4 years ago | (#31523604)

Cogent already is moot for folks that want quality bandwidth. :-)

Re:Yes, because Google's fiber costs nothing to ru (0)

Anonymous Coward | more than 4 years ago | (#31523626)

None of these have anything to do with the bandwidth bill.

Re:Yes, because Google's fiber costs nothing to ru (1)

sopssa (1498795) | more than 4 years ago | (#31523932)

Read the title of the story. We are talking about bandwidth, not what it costs to run the whole YouTube.

Re:Yes, because Google's fiber costs nothing to ru (3, Insightful)

tabdelgawad (590061) | more than 4 years ago | (#31523228)

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!

Re:Yes, because Google's fiber costs nothing to ru (1)

MikeURL (890801) | more than 4 years ago | (#31524110)

Exactly. At the point of investment in all its fiber, routers, datacenters, etc Google made a choice to invest a very large amount of money that could support something as enormous as Youtube without additional bandwidth costs. Whether that is a good investment or not depends on the ROI of having Youtube as opposed to NOT having Youtube.

So if you go back in time and DON'T invest in all that fiber, routers, etc then that money would have been available for other uses AND Youtube bandwidth costs would then need to be paid for. But either way the costs of the bandwidth are paid for. The notion that the bandwidth is free is absurd.

Re:Yes, because Google's fiber costs nothing to ru (0)

Anonymous Coward | more than 4 years ago | (#31523326)

Epic. Fail.

So why don't you write a book about it?

Re:Yes, because Google's fiber costs nothing to ru (2, Insightful)

nicolas.kassis (875270) | more than 4 years ago | (#31523398)

fiber cost don't go in the same column as bandwidth cost. Accounting solves it again.

Re:Yes, because Google's fiber costs nothing to ru (1)

thePowerOfGrayskull (905905) | more than 4 years ago | (#31523416)

"Bandwidth bill" != "infrastructure cost".

Re:Yes, because Google's fiber costs nothing to ru (1)

Rogerborg (306625) | more than 4 years ago | (#31523774)

Whoosh.

True, but irrelevant, unless you're an accuntant or economental. If I run a shop that trades spare left shoes for spare right shoes, I don't come out even, I'm down the cost of running the shop.

Re:Yes, because Google's fiber costs nothing to ru (1)

archangel9 (1499897) | more than 4 years ago | (#31524104)

unless you're an accuntant or economental.

I must remember that one during our next finance meeting.

Re:Yes, because Google's fiber costs nothing to ru (3, Insightful)

jittles (1613415) | more than 4 years ago | (#31523516)

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:Yes, because Google's fiber costs nothing to ru (2, Interesting)

jittles (1613415) | more than 4 years ago | (#31523572)

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.

Re:Yes, because Google's fiber costs nothing to ru (0)

Anonymous Coward | more than 4 years ago | (#31523850)

The summary says they are paying for their use of other networks by trading bandwidth on their own network. So if they didn't need all that bandwidth for YouTube, they could be selling their bandwidth instead of trading it. There's definitely opportunity cost there.

Re:Yes, because Google's fiber costs nothing to ru (1)

Rogerborg (306625) | more than 4 years ago | (#31523856)

You're right, I'm looking at it from the angle of someone with half a brain.

Capital investment is not free. Laying fiber is not free. But let's pretend that we're retarded, and ignore that just for the moment. Maybe magic pixies laid it for them.

Maintaining fiber is not free. Cables get cut, hardware fails, you have to pay for electricity, and for people to maintain it. You think that's free? You don't want to pay? Fine, your hardware fails, your power gets shut off, your admins go to work for AT&T. Kiss your business goodbye.

Regardless of whether Google can trade bits 1-for-1 at the edge of their network, they still have to pay extra to maintain the capacity to perform that zero-benefit trade. Trading 1-for-1 is not free.

Re:Yes, because Google's fiber costs nothing to ru (1)

archangel9 (1499897) | more than 4 years ago | (#31524112)

Capital investment may not be free, but it's off the books in a 36-month amortization schedule.

Re:Yes, because Google's fiber costs nothing to ru (3, Informative)

Chris Pimlott (16212) | more than 4 years ago | (#31524030)

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 [wikipedia.org] costs are near zero, which specifically refers money paid to a network provider to carry your traffic.

So much data (1)

BadAnalogyGuy (945258) | more than 4 years ago | (#31523008)

That's a whole lot of data without very much actionable information.

I'm not Google, nor am I an ISP. What do I care that Google's bandwidth costs are zero when I'm stuck with my pathetic broadband connection?

It's not even interesting data. The graphs make the whole presentation worse. I felt like I was reading a grad student's thesis, and a really dry one at that.

Re:So much data (0, Troll)

commodore64_love (1445365) | more than 4 years ago | (#31523046)

>>>I'm stuck with my pathetic broadband connection?

Bah. Humbug. I only have 0.7 Mbit/s at my home, and 0.05 Mbit/s on my laptop during travel. You are pratically living in luxury compared to me.

Re:So much data (0)

Anonymous Coward | more than 4 years ago | (#31523116)

I'm on 56k dialup, you insensitive clod!

Re:So much data (1)

poetmatt (793785) | more than 4 years ago | (#31523138)

.05 on your laptop? What are you using? Even edge is faster (double that), I thought?

Re:So much data (4, Funny)

omnichad (1198475) | more than 4 years ago | (#31523352)

.05Mbps = 50kbps. Sound familiar? He means dial-up! I'll be here all week for simple math help.

Re:So much data (1)

perryizgr8 (1370173) | more than 4 years ago | (#31523570)

i'm really, honestly not joking. i get 256Kbps at home over adsl. and i get ~3Mbps on my cell over 3g. thing is, the dsl is unlimited. but the cell is billed per kb at an exorbitant rate. so i try not to use it.

Re:So much data (1)

drachenstern (160456) | more than 4 years ago | (#31523184)

What do I care that Google's bandwidth costs are zero when I'm stuck with my pathetic broadband connection?

"Less than free". If they don't have to pay extra for peering then they can continue the LtF business model and can disrupt whole sectors of markets. This works out in our benefit more often than it hurts us. I for one prefer to see innovation over the same ole same ole.

Re:So much data (1)

99BottlesOfBeerInMyF (813746) | more than 4 years ago | (#31523196)

It's not even interesting data. The graphs make the whole presentation worse. I felt like I was reading a grad student's thesis, and a really dry one at that.

The graphs were lifted straight from the Web interface of the Arbor Networks product mentioned. It would have been nice and more professional to export the data and make some high resolution graphics instead and to provide more illuminating labels.

Re:So much data (0)

Anonymous Coward | more than 4 years ago | (#31523482)

Unless it's changed significantly since I last saw it a little over a year ago, those graphs are not lifted straight from the web interface.

Re:So much data (1)

99BottlesOfBeerInMyF (813746) | more than 4 years ago | (#31523666)

Unless it's changed significantly since I last saw it a little over a year ago, those graphs are not lifted straight from the web interface.

I haven't seen it in years, but they look exactly like what I recall. Maybe you're thinking of the enterprise product (Peakflow X) instead of the service provider product (Peakflow SP) which is mentioned?

Re:So much data (1)

js_sebastian (946118) | more than 4 years ago | (#31523282)

That's a whole lot of data without very much actionable information.

Do you seriously read slashdot looking for "actionable information"?

Man! and I thought that reading throught the ENTIRE summary was badass!

Except their network isn't free (1)

Kagato (116051) | more than 4 years ago | (#31523016)

Sure, they are peering. But running one of the largest networks in the world isn't exactly cheap.

So it's like when I got my Brother a new PC (2, Informative)

commodore64_love (1445365) | more than 4 years ago | (#31523018)

"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.

Re:So it's like when I got my Brother a new PC (0)

Anonymous Coward | more than 4 years ago | (#31523054)

Peering.

Re:So it's like when I got my Brother a new PC (1)

delinear (991444) | more than 4 years ago | (#31523252)

So... am I missing something or doesn't this mean it's still costing them? Okay they're paying for it with a trade of services instead of money, but that's still bandwidth they could have sold elsewhere if they didn't have to worry about Youtube, so it's still effective cost them the amount that they offset with the ISPs, which could conceivably be close to the amount in the original report.

Re:So it's like when I got my Brother a new PC (4, Interesting)

Bahumat (213955) | more than 4 years ago | (#31523400)

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.

Re:So it's like when I got my Brother a new PC (1)

sopssa (1498795) | more than 4 years ago | (#31524016)

Uh, did you forget that Google has datacenters all around the world and also reside in many IPX? Sure it might be peering between them, but because of that they can sell it too.

Payments are not the only costs. (4, Insightful)

John Hasler (414242) | more than 4 years ago | (#31523096)

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:Payments are not the only costs. (1)

poetmatt (793785) | more than 4 years ago | (#31523158)

maintaining fiber? What do you think they have to actually maintain?

There is nothing there or exceedingly minimal at most. They aren't "Renting" that fiber, they installed it themselves.

Re:Payments are not the only costs. (3, Funny)

delinear (991444) | more than 4 years ago | (#31523266)

maintaining fiber? What do you think they have to actually maintain?

Don't they have to polish the ends to ensure faster data throughput?

Re:Payments are not the only costs. (0)

Anonymous Coward | more than 4 years ago | (#31523532)

I have it on good authority that they are waxing their modem, trying to make it go faster.

Re:Payments are not the only costs. (2, Funny)

kseise (1012927) | more than 4 years ago | (#31523872)

Don't they have to polish the ends to ensure faster data throughput?

Not if they buy nice shiny Monster Cables.

Re:Payments are not the only costs. (1)

UnknowingFool (672806) | more than 4 years ago | (#31523368)

Equipment costs money to maintain. People to service equipment costs money. People and equipment to oversee and administer the network costs money. If someone accidentally severs a line in the middle of nowhere, that costs money to fix. Fiber might cost less to maintain than other technologies but that doesn't mean the cost is 0.

Re:Payments are not the only costs. (0)

Anonymous Coward | more than 4 years ago | (#31523676)

They aren't "Renting" that fiber, they installed it themselves.

I ate some 100% fiber cereal this morning. Believe me. I am just renting it.

Re:Payments are not the only costs. (0)

Anonymous Coward | more than 4 years ago | (#31523162)

Don't forget how the depreciation and maintenance cost of the fiber erases some of their taxes that buying bandwidth wouldn't.

Re:Payments are not the only costs. (1)

Blimey85 (609949) | more than 4 years ago | (#31523344)

This only matters once they reach capacity. If the bandwidth now being used by YouTube was otherwise going to be idle, then they would gain nothing by not using it. Since they already have the fiber in place, and since at least some of it is idle, and since AFAIK it doesn't cost any more to use bandwidth on the lines they already have, have paid for, and are already maintaining, I would think their cost should be very close to 0.

Re:Payments are not the only costs. (0)

Anonymous Coward | more than 4 years ago | (#31524158)

This only matters once they reach capacity. If the bandwidth now being used by YouTube was otherwise going to be idle, then they would gain nothing by not using it. Since they already have the fiber in place, and since at least some of it is idle, and since AFAIK it doesn't cost any more to use bandwidth on the lines they already have, have paid for, and are already maintaining, I would think their cost should be very close to 0.

I'd expect the average one-year maintenance cost of a run of fiber to be the following:

integral(f(x)*g(x),x,a,b)

where the interval [a,b] represents the span of the fiber, f(x) is the bdf (backhoe density function), the probability density that a backhoe will operate in the vicinity of a given point within the next year, and g(x) is the cost of sending a repair crew to that point.

Re:Payments are not the only costs. (1)

tibit (1762298) | more than 4 years ago | (#31523456)

There is no something else if you suddenly remove Google's/YouTube's traffic from the pipes. There's no lost opportunity cost, since there'd be a whole lot of underutilized infrastructure all around the world if Google/YouTube traffic had vanished.

It's not a zero-sum game. Without YouTube traffic, the sum decreases quite a bit, yet you still have all that infrastructure there's no use for.

Which is the whole reason for peering (1)

Sycraft-fu (314770) | more than 4 years ago | (#31523714)

More or less in a peering situation, each provider agrees to cover their own costs. This includes laying the fiber, buying the high end routers needed for it, powering and maintaining all that, having the staff to handle problems, etc. Since each side is paying their own costs, and both have roughly equal amounts of data the other wants, it makes sense not to charge each other.

This is also why you do have to pay when you aren't one of the big guys. Your cable modem connection to your house you don't directly pay any of the costs other than perhaps buying the equipment needed to hook up. Everything else is handled by someone else. As such, they want money for it. It isn't as though all the equipment and effort that goes to making the HFC network operate costs nothing. Also they often have to pay for at least some of their transit.

At any rate, peering is basically a case where you want to trade data with someone, but each of you is maintaining your own part of it equally. As such you don't pay each other.

It isn't only done at the high levels either, sometimes smaller groups will peer. Your ISP might peer with another ISP in town, a university might peer with other universities (they actually do this, it's called Internet 2) and so on.

Re:Payments are not the only costs. (1)

Anonymous Cowpat (788193) | more than 4 years ago | (#31523816)

nonetheless, bandwidth which tey could sell is potential money in, assuming that they can find a buyer. This arrangement guarantees no money out which they weren't going to spend anyway. To that extent, it's free.

Check out the Peering Chart from Arbor (4, Informative)

miller60 (554835) | more than 4 years ago | (#31523194)

The Wired article is from last fall. Arbor's blog post this week [arbornetworks.com] 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.

by that logic (3, Insightful)

circletimessquare (444983) | more than 4 years ago | (#31523288)

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:by that logic (4, Insightful)

FluffyWithTeeth (890188) | more than 4 years ago | (#31523486)

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.

I don't get it (2, Informative)

sweatyboatman (457800) | more than 4 years ago | (#31524062)

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.

Re:by that logic (3, Insightful)

Anonymous Monkey (795756) | more than 4 years ago | (#31523620)

It's more like you own a truck, and you are driving accost town anyway, so your friend asks you to pick up a box and deliver it. Sure you had to burn a little more gas, and it took about fifteen minutes more, but it's your friend, and compared to what you were doing to start with it's not a big deal, aka 'free'.

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'.

It's all about the peering agreements (1)

RingDev (879105) | more than 4 years ago | (#31524004)

I don't think that's quite it. The deal here (as best as I can tell) is that Google is sharing their pipes with other providers, making a peering agreement. Google doesn't own pipes all the way to your house, so they have to pay other providers to take the huge amount of traffic coming from their pipes and continue the journey. If Google had no pipes what so ever, they would have to pay for every single bit they send out.

But Google does have pipes, they bought up huge swaths of that dark fiber that was getting rolled out in the .Com bubble only to lie dormant. So when they work out their peering agreements, instead of paying cash for every bit, they can offer bandwidth instead.

So Google says "We're going to send out 1 terabyte of data per hour, and we have the bandwidth to accept 10 terabytes back." And some other peer comes along and says "We can take .5 terabytes from you if you can take .5 terabytes from us" and so on. Until Google has enough peers that they can move all of the data they want to.

This example is simplified to a point of silliness, but hopefully you get the idea. The "near zero costs" aren't implying that Google doesn't have to pay for maintaining it's own network, but that they don't have to pay cash to other providers to take the traffic from YouTube.

It is NOT zero (1)

C_Kode (102755) | more than 4 years ago | (#31523302)

The cost involved in laying fiber, maintaining it and the network itself is far from free.

Re:It is NOT zero (1)

General Wesc (59919) | more than 4 years ago | (#31523446)

They didn't lay the fiber--they bought it. Before YouTube came into existence.

Re:It is NOT zero (1)

rjstanford (69735) | more than 4 years ago | (#31524332)

They didn't lay the fiber--they bought it. Before YouTube came into existence.

Fine. Let me rephrase the GP: "The cost involved in buying fiber is far from free."

Infrastructure costs (0)

Anonymous Coward | more than 4 years ago | (#31523350)

So due to Google's infrastructure they are able to use peering agreements to not pay bandwidth costs directly. That same infrastructure has costs associated with building and maintaining it. So my question is, what portion of the infrastructure was built for other purposes and is maintained for other purposes? How much of the infrastructure is there, built and serving bandwidth merely for the same of maintaining these peering agreements? That portion is still costing money to serve youtube videos.

P&L (0)

Anonymous Coward | more than 4 years ago | (#31523376)

I guarantee you that what's on their P&L isn't zero. Even putting aside what the actual cash outlays are for laying and maintaining a fiber infrastructure, these swaps are going to be used to book both expense and revenue at a "market price."

This is the same thing that the telcos (in particular Qwest) were doing in the 90s. They were doing it with dark fiber though, which is where it turned into actual straight up fraud.

Mandatory anti-NSA rant. (-1, Troll)

Anonymous Coward | more than 4 years ago | (#31523444)

NSA sucks!

Enough said.

Anarcho-Capitalism FTW!

Bite me.

(Signed: Alex Libman's sock-puppet.)

Buying rather than leasing costs money. (4, Insightful)

91degrees (207121) | more than 4 years ago | (#31523498)

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".

Re:Buying rather than leasing costs money. (2, Insightful)

Demonantis (1340557) | more than 4 years ago | (#31523988)

You are correct on so many levels then wrong on so many others. Every company has to pay to maintain their own network. It just happens that Google's network is massive and goes across the country as they share huge amounts of information between data centers. It costs them significant money to maintain, but hey every company has to do that at least in their buildings. Now when they want to hookup to the internet, like most other companies they should have to pay their provider(s) for the connections. They don't though because they can sell or contract out the extra bandwidth they have to their providers reducing their costs to connect to the internet to zero. Not the infrastructure costs.

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:Buying rather than leasing costs money. (1)

d1r3lnd (1743112) | more than 4 years ago | (#31524068)

Yes, most companies lease their offices. I would imagine, though, that commercial real estate agencies might own their own offices. Similarly, when I go fishing, I don't buy a boat - but my guess is that most fishermen own theirs. If you're not seeing where I'm going with this, you may want to consider the industry that Google is in, and why having the physical infrastructure of an internet service provider might be of use to a company that provides services over the internet. Why would they want to lease their bandwidth? Spending money on fiber isn't preventing them from business expansion - it IS business expansion. That's what makes YouTube so cheap for Google to operate.

Opportunity Cost (2, Insightful)

Colonel Korn (1258968) | more than 4 years ago | (#31523716)

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.

tore up street eight times in 1990s to add fiber (1)

peter303 (12292) | more than 4 years ago | (#31523778)

The telcom companies seemed to have the street in my office park in a perpetual state of construction during the dot.com boom. First we'd see all the different paint mark symbols from the utilities and previous fiber. Then came the new digging. There must be a ton of dark stuff still around.

Telecom Company Spin (1)

Jason Levine (196982) | more than 4 years ago | (#31524090)

I can hear the telecom companies gearing up to spin this already. They're fond of claiming that Google "steals" their bandwidth and that they need to be able to charge Google for the "privilege" of getting access to the Telecom's users. (Of course, one wonders if the telecoms would be willing to pay Google for the "privilege" of their users being able to access Google's services.) I can just see them spinning the "Google maintains such a big network that they offset bandwidth costs via peering arrangements" into "Google doesn't pay anything for their bandwidth and just steals our bandwidth! WAH! WAH! WAH!"

Correct me if I'm wrong, but (0)

Anonymous Coward | more than 4 years ago | (#31524180)

Wasn't the fact that it would cost Google a lot of bandwidth, one of the main reasons why they couldn't adopt vorbis/theora in Youtube? If true, this kind of blows a whole in that argument ..

Luckily (2, Informative)

kenh (9056) | more than 4 years ago | (#31524302)

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"?

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