Hey IT Nerd! What Does It Really Cost For My ISP To Deliver My Internet Service?

This is another one of those questions I get a lot. Here’s the reality. The cost for your ISP is dirt cheap. I’m basing that on this rather revealing article from the Financial Post:

“The cost associated with transmission and switching on a modern network is a non-issue — less than five cents per gigabyte and dropping fast,” David Buffett, chief executive of Radiant Communications Inc., an independent ISP, wrote in the Vancouver Sun this week.

So. What does that say about Rogers, Bell or any other ISP who charges you for going over your bandwidth cap?:

Depending on who you believe, the cost for a large incumbent ISP to deliver one gigabyte of data — when you factor in fixed costs like fibre optic cables and networking gear, as well as operating costs such as technicians and electricity — can range anywhere from a few pennies to between 10¢ and 15¢ per GB.

Netflix, for example, has claimed the cost is about 1¢ per GB. Other analysts told the Financial Post the rough average is closer to 10¢ per GB. Incumbents contend it’s much more than that. The truth likely lies somewhere in the middle.

But even if one assumes that it costs Bell or Rogers between, say, 15¢ and 25¢ per gigabyte — an estimate which many experts would peg as too high — with overage fees of between $1.50 and $5.00 for each additional GB a user downloads beyond their cap, such a pricing scheme still ensures a healthy profit margin for the provider.

Translation: The bill for your Internet service could actually be lower, but your ISP is likely padding their profits at your expense. Now you’re likely thinking that I’m against a private enterprise making money. I’m not. But when there’s a markup of 3000% – 4000%, that in my mind is a bit excessive. Perhaps the word needs to get out there about your ISP’s dirty little secret. I wonder what the reaction would be if that happened?

Oops…. Too late.

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