1 00:00:00,520 --> 00:00:03,840 Speaker 1: Welcome to Brainstuff from house Stuff works dot com where 2 00:00:03,840 --> 00:00:15,000 Speaker 1: smart happens. Hi, I'm Mars brain. With today's question, what 3 00:00:15,200 --> 00:00:19,599 Speaker 1: is a gigabyte of Internet service really cost? With Internet 4 00:00:19,640 --> 00:00:23,919 Speaker 1: service providers or i sps in Canada and the United 5 00:00:23,960 --> 00:00:28,280 Speaker 1: States planning to impose monthly bandwidth caps on us and 6 00:00:28,440 --> 00:00:32,440 Speaker 1: with extra fees being planned for people who exceed those caps, 7 00:00:32,479 --> 00:00:36,120 Speaker 1: for example one dollar per gigabyte, it brings up a 8 00:00:36,200 --> 00:00:39,639 Speaker 1: great question how much does it really cost to provide 9 00:00:39,720 --> 00:00:42,879 Speaker 1: internet access to somebody. We can get a sense of 10 00:00:42,920 --> 00:00:46,080 Speaker 1: that by looking at some of the most expensive bandwidth 11 00:00:46,120 --> 00:00:49,640 Speaker 1: in the world, the bandwidth being provided to Africa. There's 12 00:00:49,680 --> 00:00:52,199 Speaker 1: an article that appeared a couple of weeks ago that 13 00:00:52,320 --> 00:00:57,240 Speaker 1: describes this and provides some really interesting data. According to 14 00:00:57,280 --> 00:01:02,720 Speaker 1: the article entitled massive undersea cable connects Africa, there are 15 00:01:02,800 --> 00:01:06,920 Speaker 1: several interesting facts that we can glean. First, there is 16 00:01:06,959 --> 00:01:11,040 Speaker 1: a cable being placed from Europe to Africa at a 17 00:01:11,120 --> 00:01:13,880 Speaker 1: cost of six hundred and fifty million dollars. This is 18 00:01:13,920 --> 00:01:16,360 Speaker 1: an undersea cable that's being laid and not to go 19 00:01:16,400 --> 00:01:20,920 Speaker 1: into service any day now. This cable provides five point 20 00:01:20,959 --> 00:01:24,240 Speaker 1: one terra bits per second of data or five thousand, 21 00:01:24,240 --> 00:01:29,120 Speaker 1: one hundred twenty gigabits per second of data. That cable 22 00:01:29,240 --> 00:01:33,800 Speaker 1: provides fifteen access points along the coast of Africa. And 23 00:01:33,880 --> 00:01:38,360 Speaker 1: that cable is incredibly long. It's fourteen thousand kilometers or 24 00:01:38,440 --> 00:01:41,839 Speaker 1: eight thousand, seven hundred miles. It could go from Los 25 00:01:41,880 --> 00:01:45,319 Speaker 1: Angeles to New York, then back to l A and 26 00:01:45,360 --> 00:01:49,320 Speaker 1: then back to New York. It's an immensely long cable 27 00:01:49,360 --> 00:01:53,040 Speaker 1: and that's why it costs six hundred fifty million dollars. Now, 28 00:01:53,160 --> 00:01:57,320 Speaker 1: let's make several assumptions about this cable that they're installing. First, 29 00:01:57,440 --> 00:02:00,560 Speaker 1: the cable will need to be maintained, so let's round 30 00:02:00,600 --> 00:02:03,360 Speaker 1: that six d fifty million dollar price tag up to 31 00:02:03,440 --> 00:02:07,840 Speaker 1: one billion dollars to cover that expense for maintenance. Second, 32 00:02:08,120 --> 00:02:12,520 Speaker 1: the cable will eventually become obsolete, so let's imagine that 33 00:02:13,200 --> 00:02:15,919 Speaker 1: this is going to happen on a really aggressive schedule 34 00:02:15,960 --> 00:02:18,840 Speaker 1: of ten years. So ten years from now, let's just 35 00:02:18,919 --> 00:02:22,600 Speaker 1: assume that that cable is completely obsolete and it's abandoned 36 00:02:22,680 --> 00:02:26,760 Speaker 1: on the ocean floor, so it will never be used again. Third, 37 00:02:26,919 --> 00:02:29,960 Speaker 1: the people who put this cable in place wish to 38 00:02:30,000 --> 00:02:33,080 Speaker 1: make a profit on their investment, so let's assume a 39 00:02:33,200 --> 00:02:37,840 Speaker 1: two percent return on investment or per year. So after 40 00:02:37,880 --> 00:02:41,560 Speaker 1: investing a billion dollars, the operators wish to receive three 41 00:02:41,600 --> 00:02:45,840 Speaker 1: billion dollars, they get two billion dollars in profit. Given 42 00:02:45,919 --> 00:02:48,639 Speaker 1: that cost structure and the fact that the cable can 43 00:02:48,680 --> 00:02:52,600 Speaker 1: handle in round numbers, five terra bits per second or 44 00:02:52,800 --> 00:02:57,200 Speaker 1: five hundred gigabytes per second, how much does a gigabyte 45 00:02:57,240 --> 00:03:00,760 Speaker 1: cost in this system? We can say that each year 46 00:03:00,880 --> 00:03:03,840 Speaker 1: the system is going to cost three hundred million dollars. 47 00:03:03,880 --> 00:03:06,960 Speaker 1: That's three billion dollars divided by the ten years to 48 00:03:07,040 --> 00:03:11,200 Speaker 1: obsolescence that we've assumed. Second each year, the system can 49 00:03:11,240 --> 00:03:15,799 Speaker 1: transmit five hundred gigabytes per second times three thousand, six 50 00:03:15,880 --> 00:03:18,079 Speaker 1: hundred seconds per hour, times twenty four hours in a 51 00:03:18,160 --> 00:03:20,239 Speaker 1: day times three hundred sixty five days in a year, 52 00:03:20,280 --> 00:03:24,040 Speaker 1: which means there are fifteen point seven billion gigabytes to 53 00:03:24,040 --> 00:03:28,760 Speaker 1: go around, and that three hundred million dollars divided by 54 00:03:28,840 --> 00:03:32,959 Speaker 1: fifteen point seven billion gigabytes works out to one point 55 00:03:33,080 --> 00:03:39,000 Speaker 1: nine cents per gigabyte. One point nine cents. That one 56 00:03:39,040 --> 00:03:42,040 Speaker 1: point nine cents per gigabyte is the rate on the 57 00:03:42,080 --> 00:03:46,240 Speaker 1: most expensive system we can possibly imagine. That's an immensely 58 00:03:46,360 --> 00:03:49,840 Speaker 1: long and expensive cable they're laying to Africa. Remember that 59 00:03:49,880 --> 00:03:52,960 Speaker 1: we've already baked in a two percent profit margin. But 60 00:03:53,000 --> 00:03:55,040 Speaker 1: even if you want to get greedy and mark that 61 00:03:55,160 --> 00:03:58,360 Speaker 1: up in additional a hundred percent, it's only three point 62 00:03:58,400 --> 00:04:03,000 Speaker 1: eight cents per gigabyte this cable. In other words, bandwidth 63 00:04:03,040 --> 00:04:07,360 Speaker 1: by the gigabyte is incredibly inexpensive. Even on the most 64 00:04:07,360 --> 00:04:11,320 Speaker 1: expensive system we can imagine, it's pennies per gigabyte. The 65 00:04:11,440 --> 00:04:14,680 Speaker 1: question we have to ask, however, is this, does that 66 00:04:14,800 --> 00:04:18,360 Speaker 1: number one point nine cents per gigabyte represent the true 67 00:04:18,440 --> 00:04:20,760 Speaker 1: cost of the bandwidth, And the answer to that question 68 00:04:20,880 --> 00:04:23,920 Speaker 1: is no, because of congestion and the way that the 69 00:04:23,960 --> 00:04:27,960 Speaker 1: Internet is used throughout the day. Note that people tend 70 00:04:28,000 --> 00:04:31,720 Speaker 1: not to use bandwidth evenly throughout the normal day. If 71 00:04:31,760 --> 00:04:34,560 Speaker 1: they did use it evenly, then the cost per gigabyte 72 00:04:34,560 --> 00:04:37,279 Speaker 1: truly would be one point nine cents per gigabyte on 73 00:04:37,320 --> 00:04:41,000 Speaker 1: this system. However, at four am this undersea cable is 74 00:04:41,080 --> 00:04:44,760 Speaker 1: likely to be very underutilized. At other times during the day, 75 00:04:44,800 --> 00:04:48,120 Speaker 1: demand could be high. The big uproar right now is 76 00:04:48,160 --> 00:04:52,080 Speaker 1: the problem that Netflix and Hulu are causing. These online 77 00:04:52,200 --> 00:04:55,680 Speaker 1: streaming services use a lot of bandwidth, relatively speaking, and 78 00:04:55,960 --> 00:04:59,520 Speaker 1: usage tends to concentrate in the evening hours. So let's 79 00:04:59,560 --> 00:05:02,960 Speaker 1: look at the very worst case scenario that Netflix and 80 00:05:03,040 --> 00:05:08,039 Speaker 1: Hulu could cause. Worst case, imagine that every customer on 81 00:05:08,080 --> 00:05:11,880 Speaker 1: that African cable wants to watch Netflix every night at 82 00:05:11,920 --> 00:05:14,680 Speaker 1: exactly the same time. And let's make it even worse. 83 00:05:14,760 --> 00:05:17,680 Speaker 1: Let's imagine that a household has multiple people in it 84 00:05:18,040 --> 00:05:23,800 Speaker 1: and there are three simultaneous Netflix feeds going to each customer. Now, 85 00:05:23,800 --> 00:05:28,080 Speaker 1: we need approximately ten megabits per second for each household 86 00:05:28,080 --> 00:05:30,760 Speaker 1: that's connected to the cable during a three or four 87 00:05:30,760 --> 00:05:34,240 Speaker 1: hour window every night. The demand caused by this Netflix 88 00:05:34,320 --> 00:05:37,720 Speaker 1: loading caps the number of Internet accounts that we can 89 00:05:37,760 --> 00:05:41,240 Speaker 1: give out. The undersea cable can only handle five terabits 90 00:05:41,279 --> 00:05:45,000 Speaker 1: per seconds, so we have at most five terabits per 91 00:05:45,040 --> 00:05:48,560 Speaker 1: second over ten megabits per second for the Netflix feed, 92 00:05:48,880 --> 00:05:52,800 Speaker 1: which equals five hundred thousand possible customers on this cable 93 00:05:52,880 --> 00:05:56,000 Speaker 1: with this peak loading. So we have to spread the 94 00:05:56,160 --> 00:05:59,160 Speaker 1: three billion dollar cost of the cable and its profit 95 00:05:59,360 --> 00:06:02,640 Speaker 1: over those five thousand customers. What does that work out 96 00:06:02,720 --> 00:06:06,560 Speaker 1: to per month in the ten years we've assumed there 97 00:06:06,600 --> 00:06:09,320 Speaker 1: are a hundred and twenty months, so that works out 98 00:06:09,400 --> 00:06:14,320 Speaker 1: to exactly fifty dollars per customer per month. Fifty dollars 99 00:06:14,360 --> 00:06:17,880 Speaker 1: per month is the worst case scenario. We're assuming that 100 00:06:17,960 --> 00:06:22,520 Speaker 1: every single customer will be watching three simultaneous high deaf 101 00:06:22,640 --> 00:06:27,280 Speaker 1: Netflix movies at ten megabits per second simultaneously every night. 102 00:06:27,760 --> 00:06:30,679 Speaker 1: The pipeline can handle that kind of worse case load 103 00:06:31,040 --> 00:06:35,440 Speaker 1: with a two profit margin for fifty dollars per month, 104 00:06:35,839 --> 00:06:38,400 Speaker 1: and that would be some of the most expensive bandwidth 105 00:06:38,440 --> 00:06:41,719 Speaker 1: in the world. What is the cost per gigabyte? Now, 106 00:06:42,200 --> 00:06:45,800 Speaker 1: if you assume that each customers allocated a true ten 107 00:06:45,920 --> 00:06:49,599 Speaker 1: megabits per second, and if you assume that the customer 108 00:06:49,760 --> 00:06:53,120 Speaker 1: is pulling that true ten megabits per second for six 109 00:06:53,279 --> 00:06:57,599 Speaker 1: solid hours a day, then each customer is pulling twenty 110 00:06:57,680 --> 00:07:02,400 Speaker 1: one gigabytes per day, or roughly six hundred gigabytes per month. 111 00:07:02,920 --> 00:07:07,240 Speaker 1: Fifty dollars over six hundred equals eight point three cents 112 00:07:07,320 --> 00:07:11,400 Speaker 1: per gigabyte, less than a dime. In other words, Internet 113 00:07:11,440 --> 00:07:16,120 Speaker 1: service can be provided profitably for pennies per gigabyte in 114 00:07:16,200 --> 00:07:20,360 Speaker 1: the absolute worst case scenario. Let's imagine that we lived 115 00:07:20,400 --> 00:07:22,960 Speaker 1: in a rational world where i sp s were not 116 00:07:23,080 --> 00:07:25,880 Speaker 1: trying to gouge customers and we were all trying to 117 00:07:26,000 --> 00:07:30,640 Speaker 1: utilize resources efficiently. Then we have to admit that Netflix 118 00:07:30,680 --> 00:07:33,960 Speaker 1: and Hulu really can increase the cost of bandwidth because 119 00:07:34,040 --> 00:07:38,120 Speaker 1: they create congestion in finite pipelines. There are a number 120 00:07:38,160 --> 00:07:41,560 Speaker 1: of things we could do working together to relieve that congestion. 121 00:07:41,720 --> 00:07:46,080 Speaker 1: For example, bandwidth that low usage times would be essentially free, 122 00:07:46,080 --> 00:07:49,000 Speaker 1: and bandwidth at eight PM might cost a dime per 123 00:07:49,040 --> 00:07:52,560 Speaker 1: gigabyte because many people are trying to use the pipe simultaneously. 124 00:07:53,160 --> 00:07:56,280 Speaker 1: If time of use pricing like that were put into place, 125 00:07:56,640 --> 00:08:01,440 Speaker 1: what would happen. Many activities like Internet backups, bit torrent, 126 00:08:01,560 --> 00:08:04,800 Speaker 1: file uploads and downloads and so on would likely move 127 00:08:04,920 --> 00:08:08,160 Speaker 1: to low cost hours, spreading out the load. Places like 128 00:08:08,280 --> 00:08:12,280 Speaker 1: Netflix and Hulu might offer customer services that pre download 129 00:08:12,320 --> 00:08:15,800 Speaker 1: what they want to watch tomorrow. People might voluntarily choose 130 00:08:15,880 --> 00:08:19,640 Speaker 1: lower bandwidth versions of shows they're watching during peak hours. 131 00:08:20,000 --> 00:08:23,240 Speaker 1: New applications might spring up to take advantage of essentially 132 00:08:23,320 --> 00:08:26,520 Speaker 1: free bandwidth and early morning hours, and so on. In 133 00:08:26,560 --> 00:08:29,920 Speaker 1: other words, the marketplace would take actions to spread out 134 00:08:29,960 --> 00:08:33,360 Speaker 1: band with usage throughout the day to make better use 135 00:08:33,400 --> 00:08:36,720 Speaker 1: of the resource, and the cost of bandwidth would actually 136 00:08:36,720 --> 00:08:40,280 Speaker 1: go down, not up. We can at least dream that 137 00:08:40,280 --> 00:08:43,560 Speaker 1: that would happen. That's what would happen in an ideal universe. 138 00:08:45,760 --> 00:08:48,320 Speaker 1: Be sure to check out our new video podcast, Stuff 139 00:08:48,360 --> 00:08:51,000 Speaker 1: from the Future. Join how Stuff Work staff as we 140 00:08:51,040 --> 00:08:56,120 Speaker 1: explore the most promising and perplexing possibilities of tomorrow. The 141 00:08:56,200 --> 00:08:58,719 Speaker 1: how Stuff I Find app has arrived down at it 142 00:08:58,800 --> 00:09:00,240 Speaker 1: today on it and s