WDTalk

I read an interesting thread recently that continued on for 20+ pages related to bandwidth pricing. The original post was about blended bandwidth being offered for $3.99/Mbps at a 10Mbps commitment.

Is this extremely aggressive bandwidth pricing or some sort of marketing scheme?

To be sure, it’s very aggressive given no one in the industry comes close to $3.99. But, if you weigh the risk that not everyone will use that 10Mbps, then the law of averages leans in your favor.

Let’s say that client one uses 3Mbps (still pays for 10Mbps) and client two uses 8Mbps (still pays for 10Mbps). You collect for 20Mbps ($39.99 x 2 = $79.98). The actual cost to client one for bandwidth is not $3.99/Mbps. It factors out to $39.99 divided by 3 = $13.33/Mbps.

Client two’s actual cost for bandwidth is closer to the norm. Their actual cost would be $39.99 divided by 8 = $5.00/Mbps.  Now that’s a great deal.

But this is just a small part of the big picture.

Everyone in the industry knows the total cost of ownership is the combined cost of the cabinets/racks/power and so on.  Any losses on aggressive bandwidth pricing can be used as loss leaders by augmenting other services.

As a data center, you must evaluate the risks (long term) of marketing campaigns. Can you deliver on your bandwidth deals?  I’m very sure in the coming months, many many posts will circulate the forums about this offering. Stay tuned.