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Bandwidth pricing at GCP/AWS/Azure is not reflective of the price to provide the bandwidth. Cloud pricing is strange because it's not based on reality or cost

Bandwidth pricing at GCP/AWS/Azure is not reflective of the price to provide the bandwidth. Cloud pricing is strange because it's not based on reality or cost of providing the service at all. It's also clearly an anti-competitive market once you understand that. Short answer is that the big clouds are trying to make a profit - a large profit - and competing with each other cuts into that profit & devalues the market. If the market isn't lucrative enough, the big clouds will have less priority to push their clouds and everyone loses. There is no other property here. Reliability/redundancy is not a factor. (Routers & switches don't cost much anymore) Performance is not a factor. (Do people really think they don't get their bandwidth almost free through peering?) It's all profit.

randyrand 6y ago
So you think if Azure or someone offered the best prices compared to the competition they would be swamped in losses due to the increased demand? Or that they’ve all decided to keep prices up to have similar demand and profit? Neither of those make very much sense to me unless there is active collusion.
- noobaccount 6y ago
  Perhaps high bandwidth costs deter undesirable customers or usecases? A slight restatement of your idea. Just speculation.
- iscoelho 6y ago
  Price is a race to the bottom. Nobody wants that. Look at Oil. None of them want to be known as the cheapest provider. They want to be the best provider. Twist on Argumentum ad crumenam [https://en.wikipedia.org/wiki/Argumentum_ad_crumenam https://en.wikipedia.org/wiki/Argumentum_ad_crumenam]: Fallacy that if it is more expensive, it is better.
- blueblisters 6y ago
  Azure and AWS both have their respective moats. Their locked-in customers would be up in arms if they decide to offer substantially lower rates to new customers. However, I am not sure what's holding Google back. They have all the right incentives to launch a price war but I guess they are focusing more on "value-addition" with ML cores, AI APIs etc.
  - Can_Not 6y ago
    Google cloud has significantly cheaper prices and a more generous free tier than AWS, so they kind of already are.
smabie 6y ago
Yeah, but other markets that have robust competition don't look like this. Why are cloud services different? Of course, the answer is that there's insanely high demand and massive lock-in. AWS/GCP/Azure are only competing for new customers, as existing customers are locked in by way of proprietary infrastructure. I imagine that the existing customers completely dwarf new customers, so the best move on their part is to charge high prices. Only a non-dominant player like DO needs to make bandwidth cheap.
zylent 6y ago
It really is the routers + switches. Most VPC’s are eVPN’s, and you have to have the capacity to burst 10g+ to any of your datacenters in the world. I’m not defending their pricing, but supporting that kind of traffic flow at any time likely leads to a lot of underutilized hardware.
fullito 6y ago
Peering costs money and ISPs like Telekom are missusing it. All those Telekom Endusers are consuming Google Services like YouTube etc. but Telekom doesn't peer for free. You have plenty of peering congestion stories here in germany for the last 10 years. A german hoster called Hetzner, also did not wanted to play that game with Telekom and you were able to pay 5,- Euros per Month to have paid peering between your Server and Telekom. When you look at Telekoms peering: https://www.peeringdb.com/net/196 https://www.peeringdb.com/net/196 they have only 20G with DE-CIX Frankfurt. They don't peer publicly, we should force them :( https://www.peeringdb.com/net/433 https://www.peeringdb.com/net/433 google vs. do https://www.peeringdb.com/net/6494 https://www.peeringdb.com/net/6494 Reliability, redundancy, peering, latency are factors.
- iscoelho 6y ago
  Private peering agreements usually have NDAs & are not listed anywhere. The big clouds are a magnitude larger than Hetzner as well. Google didn't start out as a cloud. Especially with YouTube, they no questions have private peering with Telekom. Azure? Windows Update, Xbox, & more. Tons of data coming from the Microsoft network with their immense market share. They no questions have private peering as well. Amazon? That is the only one that may not have private peering with Telekom, but considering they reign #1 in the cloud wars, it is also likely.

randyrand 6y ago

So you think if Azure or someone offered the best prices compared to the competition they would be swamped in losses due to the increased demand? Or that they’ve all decided to keep prices up to have similar demand and profit? Neither of those make very much sense to me unless there is active collusion.

noobaccount 6y ago
Perhaps high bandwidth costs deter undesirable customers or usecases? A slight restatement of your idea. Just speculation.
iscoelho 6y ago
Price is a race to the bottom. Nobody wants that. Look at Oil. None of them want to be known as the cheapest provider. They want to be the best provider. Twist on Argumentum ad crumenam [https://en.wikipedia.org/wiki/Argumentum_ad_crumenam https://en.wikipedia.org/wiki/Argumentum_ad_crumenam]: Fallacy that if it is more expensive, it is better.
blueblisters 6y ago
Azure and AWS both have their respective moats. Their locked-in customers would be up in arms if they decide to offer substantially lower rates to new customers. However, I am not sure what's holding Google back. They have all the right incentives to launch a price war but I guess they are focusing more on "value-addition" with ML cores, AI APIs etc.
- Can_Not 6y ago
  Google cloud has significantly cheaper prices and a more generous free tier than AWS, so they kind of already are.

smabie 6y ago

Yeah, but other markets that have robust competition don't look like this. Why are cloud services different? Of course, the answer is that there's insanely high demand and massive lock-in. AWS/GCP/Azure are only competing for new customers, as existing customers are locked in by way of proprietary infrastructure. I imagine that the existing customers completely dwarf new customers, so the best move on their part is to charge high prices. Only a non-dominant player like DO needs to make bandwidth cheap.

zylent 6y ago

It really is the routers + switches. Most VPC’s are eVPN’s, and you have to have the capacity to burst 10g+ to any of your datacenters in the world. I’m not defending their pricing, but supporting that kind of traffic flow at any time likely leads to a lot of underutilized hardware.

fullito 6y ago

Peering costs money and ISPs like Telekom are missusing it. All those Telekom Endusers are consuming Google Services like YouTube etc. but Telekom doesn't peer for free. You have plenty of peering congestion stories here in germany for the last 10 years. A german hoster called Hetzner, also did not wanted to play that game with Telekom and you were able to pay 5,- Euros per Month to have paid peering between your Server and Telekom. When you look at Telekoms peering: https://www.peeringdb.com/net/196 https://www.peeringdb.com/net/196 they have only 20G with DE-CIX Frankfurt. They don't peer publicly, we should force them :( https://www.peeringdb.com/net/433 https://www.peeringdb.com/net/433 google vs. do https://www.peeringdb.com/net/6494 https://www.peeringdb.com/net/6494 Reliability, redundancy, peering, latency are factors.

iscoelho 6y ago
Private peering agreements usually have NDAs & are not listed anywhere. The big clouds are a magnitude larger than Hetzner as well. Google didn't start out as a cloud. Especially with YouTube, they no questions have private peering with Telekom. Azure? Windows Update, Xbox, & more. Tons of data coming from the Microsoft network with their immense market share. They no questions have private peering as well. Amazon? That is the only one that may not have private peering with Telekom, but considering they reign #1 in the cloud wars, it is also likely.