The real barrier to innovation isn’t the cost of bandwidth
Populist dogma from Free Press would have us believe that all websites are supposed to be equal in capability and reach regardless of what they pay to connect to the Internet, but broadband providers are the evil gatekeepers scheming to price all but the wealthiest corporations out of Internet content delivery. The conclusion that Google would have us draw from such fantasies is that new regulations are needed to marginalize and restrict the broadband providers from offering premium delivery services to content providers under the guise of “nondiscrimination”. The problem with this line of reasoning is that it has no basis in economic or legal reality.
The basic premise that all websites are supposed to be equal in outcome is a fantasy. Instead of having equal service at equal cost where outcome varies depending on the amount of money spent, the Internet regulation advocates push the idea that service should be equal regardless of cost. But anyone who has ever purchased broadband or Internet connectivity knows that higher priced services perform better. If they didn’t perform better, no one would ever pay the higher prices.
The idea that broadband and Internet transmission services are a serious economic barrier to innovation or smaller groups or individuals has no basis in reality. That’s because broadband connectivity for most homes and businesses cost less than electricity or other basic utilities. From a budget perspective, Internet connectivity costs aren’t very high on the list of expenditures. Digital Society spends $50/month on server colocation and we can host 10 million page views at 100 KB per view.
Those who don’t care as much for vanity domain names can host text, images, and even 1080P high definition video for free at many competing websites. Google will even pay the content owner a share of advertising revenue to host their content at YouTube. Since content delivery is essentially free for the individual or small nonprofit group, the real challenge in getting to be seen on the Internet is having worthwhile content, good search ranking placement, and advertising. The problem is that search and advertising is orders of magnitude more expensive than the cost of content delivery. In fact we can see the massive difference in table 1 below.
|Bandwidth for 1000 page views (100KB per page) ||$ 0.0006||$ 0.003|
|Bandwidth for 1000 video views (10 MB per SD 360P video) ||$ 0.030||$ 0.093|
|Bandwidth for 1000 video views (100 MB per 720P HD video) ||$ 0.300||$ 0.926|
|1000 Vimeo Plus HD video deliveries (assuming no unused budget)||$ 2.400|
|Advertising 1000 impressions (hoping to get fraction of page views) ||$ 1.000||$ 40.000|
|Getting 1000 visitors from clicks ||$ 50.000||$ 200.000|
 Based on $2 to $10 per Mbps per month IP transit cost
 Based on $1 to $3 per Mbps per month for Paid Peering
 Based on $1 to $40 CPM (cost per 1000 impressions)
 Based on $50 to $200 per 1000 clicks
As we can see, bandwidth costs are almost negligible compared to other costs even when it comes to High Definition video. The vast majority of applications on the Internet fall somewhere between web page delivery and Standard Definition video. The challenge is producing worthwhile content and paying for the advertising.
In light of these facts, there is no reason to see broadband and Internet providers as economic barriers and there is no reason to prevent them from offering their services to content providers. Preventing content providers from entering into voluntary and nondiscriminatory business arrangements with broadband providers will harm innovation.