How do ISPs make their money?

How do ISPs make their money?
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ssavoy @ 4th Jul 04:54PM:
How do ISPs make their money?

Just out of curiosity, how does an ISP (for example, Verizon) supply you with a 50mbps fiber connection for $100-$150 a month when I've seen 1.5mbps connections (T1's) go for nearly $400?
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tschmidt @ 4th Jul 10:03PM:
Re: How do ISPs make their money?

It cost much less to deliver data over fiber then copper. A lot of T1 pricing is historic and because it is a guaranteed business class service with an SLA.

/tom
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JesseHarris @ 5th Jul 12:22AM:
Re: How do ISPs make their money?

T1 lines are very, very overpriced. The actual transport cost for a T1 is minimal even if you peg the bandwidth 24/7. (That's 486GB which at a HIGH of $0.015/GB would be around $7-8 worth of actual data transfer.) The only reason a lot of businesses get a T1 over metro Ethernet (which is growing in popularity) is because it can be channelized using ISDN/PRI for voice calls. Even that is on the decline given the rise in VoIP.

When you figure that the cost of data from the POP to the rest of the Internet is dirt cheap and getting cheaper and that the old copper network has been paid for many times over, you realize that copper deliver (DSL, T1, etc.) is almost pure profit. Even though Verizon has spent a crapton of money on building fiber, they still have one heck of a markup going on, especially since the operating cost of last-mile fiber is about 1/10 that of copper.
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Jesse Harris
Chairman, UTOPIA Citizens Advisory Network
»www.freeutopia.org/
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Facekhan @ 17th Jul 04:36PM:
Re: How do ISPs make their money?

Easy, the xLECS basically inherited an almost universal copper infrastructure built by a government protected monopoly. Almost everything they sell on copper is pure profit.

Cable companies are much the same way as most communities had a local cable monopoly that was eventually swallowed up by Comcast or Time Warner or one of the other big cable companies. There is very little competition within each particular area, usually no more than DSL vs Cable both from large monopoly providers that only need to price things in relation to one another. Neither has an interest in a price war and there are hardly any upstart competitors to force them into one. Cable has turned out to be the superior overall package (bundled with cable tv which people want vs bundled with land-line phone service which people are dumping)

If you check out Comcast's balance sheet for example, their gross profit on the sale of internet/tv service is nearly 80%. While operating costs, advertising, and longterm capital expenditures gobble most of that up, they are still very profitable.

A lot of the big cable companies have odd corporate structures and despite being publicly traded, most of the control still rests with the founding families even if they only own a tiny percentage.

T1's are expensive mainly because they have SLA's and are to some extent dedicated bandwidth. Half or more of the price is usually a local loop fee that is basically you paying for those two copper wires from the CO to your location and no one else can use them.
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FaceKhan Citizen Khan dot com
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