[AusNOG] Netflix, AWS and Softlayer vs. Australia

[Oz Nog]

> This reads to me like you think there is going to be a whole lot of extra traffic.
   I sure do. Simply going from 160 ms to 1.6 ms is going to release a lot of pent up demand.

> I'm not sure that is going to be the case. Of the three services/service providers you've mentioned, only one of them could possibly create a lot of extra traffic and that is Netflix.
   I think it's a serious mistake to write off the whole Internet ecosystem, just because traffic is currently concentrated with a few large players.

   I also think you are underestimating Netflix. Going from 200 000 Australians backhauling low bitrate streams from the US to millions of Australians streaming HD video during primetime is going to make quite a splash.

> Local services might shift that traffic from transit to peering, which is a good thing, and might cause some networks to increase peering link capacity, of which the cost may be offset or completely paid for by the reduction on transit traffic. 
> With an extremely "well peered' network you may be able to absorb that load with your existing unused peering link capacity if it is distributed enough.
   While technically true, the above completely misses the point, as the problem is not scaling up peering links or moving from IP transit to local peering. A fat load of good your excellent interconnectedness is going to do you when all the costs are in last mile backhaul.

  Case in point: NBNco CVCs are charged at $20 per Mbps. You don't get charged per actual usage, you pick a CVC pipe size and you pay up front. So you pay $20 per Mbps of your estimated peak usage plus some margin of safety. That ends up being a lot of money.

  So, back to that kid in his parent's basements with a couple of hundred dollars to his name. He and his 1Gbps server are going to cost you $20 000 in domestic backhaul costs (Queue mad laughter from NBNco laughing all the way to the bank). How many kids like that can your ISP business take?  Where's that money going to come from? Your fat cat ISP margins?

  To add insult to injury, in addition to the kid and his 1Gbps server, you already know that you are in for minimum 30% base rate increase in domestic backhaul costs as soon as Netflix lands.

   Remember, your customers are going to eat up all that new content with a big happy grin on their faces. And for every dollar the content originators spend on pushing traffic to you, you, as the ISP, are going to spend $10 to $100 on domestic backhaul. Who do you think is going to run out of money first?

Cheers,

Baz