928RA — Bandwidth Limits and Pricing Effects Must be Accounted for in Cloud Plans
What is happening? — Based on US-based carriers’ actions and announcements in recent months, the era of one-price, all-you-can-use bandwidth is reaching its end. Saugatuck sees this as unsurprising, inevitable, and eminently predictable. The ungoverned, unrestricted use of any resource will increase its scarcity and its price over time.
What we do see as surprising is the number of enterprises small and large that have not yet accounted for the increasing, and increasingly variable, costs of bandwidth into Cloud IT and Cloud business plans, strategies, and spending.
Failure to account for bandwidth costs and failure to plan for bandwidth price variation will not cripple Cloud adoption, but it will unnecessarily increase the costs of managing Cloud IT and business. Interestingly, bandwidth pricing in the US could help to drive the expansion of Cloud IT and business services availability and use overseas.
Why Is it Happening? — The root cause of this (so far) US-oriented bandwidth crisis is a combination of market shifts, regulatory factors, and carrier business/operations planning.
It often takes 2 or more years for carriers or cell tower companies to obtain local regulatory approval (at the municipal or county level). The same processes can also slow down new terrestrial improvements – either for new towers, or for major upgrades. Most carriers in the US foresaw the need to build out more infrastructure as they saw growth in such consumer behaviors as video-on-demand and online gaming.
What none foresaw was the explosion of Cloud-oriented services demand and use by consumers and business, especially via 3G services. These networks (and the terrestrial back-haul networks supporting them) were designed, and mostly built out, based on 1990s-era cellular usage patterns; i.e., they were designed and built to support voice traffic. Even today, most of the backhaul uses T1, not Ethernet services.
The net result: Cellular/wireless traffic grew into broadband-hungry Cloud-based services and use far more quickly than carriers imagined, let alone planned and budgeted for; and the slow, grinding machinery of local regulatory and political process have so far failed to keep up with the carriers’ now-urgent requests/demands for new construction. Wireless and terrestrial networks, including 1990s-era network switching and management systems, are taxed to the max. And after significant build-outs and M&A/market consolidation in the 1990s, carriers have focused more on . . . Click Here to Read the full RA