It really amazes me how ridiculous cloud providers are with their bandwidth pricing. Anything with user generated video is not feasible on the current cloud providers. Dedicated server providers like OVH are more than an order of magnitude cheaper. Anyone know why cloud providers have such high markup on bandwidth?
It can be at least partially explained by a mismatch between the "cloud" model and the underlying engineering (and market) reality [1].
One has to build (or buy) for peak bandwidth. Selling it pay-as-you-go, with no regard to local maxima, means one has to price that rate high enough to account for the typical (and then some) spikiness in traffic. [2]
It's not hard to imagine that something like a UGC video site might significantly increase that spikiness ratio, if only because of the sheer quantity of data involved. Moreover, it's a large quantity of data transfer per user, so even modest user growth would result in huge network use growth. As a sibling comment pointed out a cloud provider "may not really want that type of client".
Perhaps cloud providers could start charging on a more traditional-ISP 95th-percentile style basis for larger customer and engineer their networks accordingly, but then they might have to keep those customers corralled in specific datacenters, which would remove part of the value of cloud infrastructure.
[1] Forgetting that "the cloud is just somebody else's servers" also led to the delusion that one doesn't have to "worry" about hardware failures in the cloud. Fortunately, it's now common knowledge that EC2 instances are subject to disappearing due to hardware reasons and that this needs to be "worried" about (engineered around).
[2] There is a similar issue with residential electricity pricing, where consumers pay a flat rate but the utility actually pays time-of-use (potentially a much higher rate on the spot market). Somewhat related to but not identical to rooftop solar using the grid as a "free battery", since that's also time-of-use. These come up routinely on HN discussions of electric power.
Wouldn't it be cheaper for cloud providers though? They are buying more bandwidth so they can get it cheaper. Also, they are taking advantage of the fact that clients have unused bandwidth so they can overprovision and get cost savings that way as well. I would think that that SHOULD make it cheaper for clients, but the opposite seems to be the case.
> They are buying more bandwidth so they can get it cheaper.
I don't think that's actually true. The first assumption, that they are buying something from someone else is potentially flawed, and the conclusion is based on another potentially flawed assumption, that bandwidth has an inherent volume discount.
I say "potentially" flawed because these assumptions easily hold true for small enough providers and little enough bandwidth.
At large provider scale, it's probably safer to assume that they're building instead of buying, and those costs follow fairly large, discrete steps.
Increasing bandwidth means buying faster DWM modules and, possibly, higher-end equipment that supports them. It might mean doing that for their network peer, too.
In many cases, I expect it would mean bypassing shared infrastructure like internet exchanges, which might be limited to as little as 10Gb/s or even 1Gb/s and getting direct peering arrangements (including physical connections) with other networks, including possibly reimbursing them for their costs. This can be complicated by the new peer only having just enough bandwidth to that exchange point to match the exchange's maximum bandwidth, in which case peering will require co-locating somewhere else, with all the hardware and (hopefully dark but not always possible) fiber leasing costs.
None of those costs are necessarily high if considering maximum available bandwidth, such as if they spent 5x to get 20x or even 100x the capacity. However, if they only did it for a single customer that, on average only uses 2x the bandwidth (and only peaks at 20x-100x at rare times or only on certain, unpredictable in advance, connections to peers), they experienced a volume premium, rather than a discount.
