||: Some Economics ($ and route costs) of International Transmission :||
All, this is a bit off topic, but I found it to be an informative piece (actually old news, but worth printing here) on how international internet and many POTS calls are routed today. How does this affect latency, when a call is placed, say, from an LA ITSP to a UK ITSP subscriber, and it must traverse the Atlantic not once, but twice, perhaps? Maybe more times, in the case where the sub is off prem, or in another country?
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"Cheapest Network Is Indirect Line"
June 1, 1998
Say your company has offices in France. Say, too, you
want to set up a high- speed network from Paris to London.
Logic says the wires should run from one capital to the next.
But reality says something else.
Instead of paying for lines from London to Paris, you'd
actually save money by sending all that traffic to the
U.S. and back again over U.S.-owned networks. In all,
data travels 500 times as far for one-tenth the cost, even
though all sides agree that actual costs for equipment
and services are roughly equal in the U.S. and Europe.
Why are prices different? Chalk it up to monopoly
power.
"It's expensive for historic reasons. People wanted to
protect the European [phone monopolies] from the
American giants," says Ian Dixon, president of the
European Internet Service Providers Association. "We
need to solve this problem."
To do that, EuroISPA is holding a two-day conference
(www.euroispa.org/conference) in Brussels, Belgium,
June 4-5. There, Internet service providers (ISPs),
hardware makers and software developers will huddle
with members of the European Parliament, telecom
ministers from the European Commission and others to
talk about how to cut prices.
Perversely, Dixon says, protectionist policies that
guaranteed prosperity for the phone monopolies are
hobbling the European telecom sector today.
When every phone company had a monopoly, it could
charge whatever it wished. And since governments
owned them, they generally charged heavily to fill public
coffers and provide jobs with security -- a guarantee that
foreigners would be kept out sealed the deal.
But the growth of international communications has
exposed a weakness in those arrangements. International
tariffs to the U.S. are still lower than intracontinental
rates. As a result, ISPs and large corporations buy 45
megabit- per-second lines to the U.S. for Net service
instead of lines within the continent. Those circuits cost
a staggering $450,000 per month for what amounts to
local service. U.S. ISPs, by contrast, typically charge
$4,000 monthly for a similar domestic connection.
Problems don't end there, though. In addition to facing
high rates for intracontinental traffic, European ISPs
subsidize European telcos every time they buy a line to
the U.S. because, by law, European telecom monopolies
get half the fees paid for the line. U.S. companies, in turn,
use those fat overseas rates to subsidize their forays
into Europe.
The solution? More competition, like the free market that
was supposed to start in Europe Jan. 1. As in the U.S.,
though, incumbents move slowly to hook their networks
to rivals'.
The Net Net
Sending data to U.S. from Europe is cheaper than
between cities in Europe
Origin
Destination
Cost
Virginia
London, Paris and Stockholm, Sweden
$30K
Stockholm
Paris and London
35K
Paris
London
38K
Monthly telecommunications cost, 2-Mbps circuits
To: Frank A. Coluccio (663 )
From: Frank A. Coluccio Monday, Jun 1 1998 8:32AM ET
Reply # of 673
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