100 mbps Residential Internet vs 100 mbps Business Internet..Why the Price Difference?

“Why can I pay ~$115.95 at home for 100Mbps internet download speed but 100Mbps download speed for my business is $2800 or more per month?”

This is a great question and becoming more and more popular as people look for high speed internet access.  Let’s take a look at the reasons behind it.

A view of a typical 100-500 mbps fiber cable

In residential areas, there are multiple families on a single street or in a specific block.   The local carriers will typically install a large capacity “pipe” or cable into a central location in a neighborhood and then divide the bandwidth amongst their clients.  The large capacity cable will usually be in the 500Mbps range.  The 500Mbps pipe would cost the carriers ~$4,000 in monthly expenses to install and maintain at a reasonable profit level.  (Remember, the carriers are in business to make money.)

Before we go any further, it’s important to understand the difference between “asynchronous” and “synchronous” transmission capabilities.  Synchronous transmission refers to communications where the sending and receiving speeds are exactly the same.  Asynchronous transmission has different speeds on the sending (uploading) and receiving (downloading) ends.  This is the key to understanding the costs differences we are discussing.

Now that we understand the difference between “Synchronous” and “Asynchronous” let’s continue.  At your home you may select an internet plan with “Up to 20/5 download upload speeds”.  Now exactly what does this mean?  First, understand you are NOT getting a direct link to the carrier, rather you are on a type of shared service.  The carrier will split off a portion of the large capacity pipe going down your street and put a “drop” (the drop is the connection from the pole to your home) in to give you internet access.  If you read the fine print, it will say “speeds not guaranteed”.  They can’t guarantee speeds on this type of service because they are dependent on how many users are simultaneously using the pipe in your neighborhood.   You can almost always see the difference in performance at 3:00 pm vs. late night or early morning.  Why?  Because schools get out at this time and the students are all doing their homework, using the internet.  You MIGHT get the 20mbps download and 5 upload speed at 3am when you’re the only one in the neighborhood using it, but I doubt it.   Some carriers are even offering businesses 100 mbps download, 10 mbps upload for under $500 per month.  Not guaranteed speed, but it sure sounds good.  I wouldn't want my business with 15 or more reps running applications using it though.  You'd better have a good backup program for them.  They'll have plenty of spare time waiting for the screens to move.

You can check the actual speed of you connection for free at www.speedtest.net.  Here’s the one from my home connection at 3pm on Saturday……

The carriers will also provide a residential type router (they're not very expensive, which is why the carriers are willing to send you a replacement whenever you report trouble).  How many times have you called to report a problem, only to be told to “Unplug the router for 30 seconds, then plug it back in?”.  If that doesn’t work, you’ll have to usually have to wait to have a replacement router mailed to you.

Now let’s look at your business.  With true “Business Class” a carrier dedicates a single large capacity “pipe” to one customer and will guarantee the 100mbps/100mbps speeds. (Don’t get fooled by false claims from sales people about their service being “Business Class”.  Remember asynchronous vs synchronous.  If the carrier is quoting you 100mbps/10mbps speeds, this is merely residential service masked as business class.  True business class has synchronous speeds.)    Business class service comes with a business class router which is capable of being troubleshot remotely and will rarely fail.  These routers are substantially more expensive and far more functional than the ones you get at home.

If you want a great question for the sales rep pushing business internet at 100mbps/10mbps speeds, ask them what their guaranteed MTTR is? That's "Mean Time To Repair" should you ever experience a outage.  I'd love to hear what you think of their answer?  True Business Class internet access should have a MTTR of no more than 6 hours before credits are issued.

Finally, let’s look at the pricing.  On residential service, the large capacity pipe (in this example let’s assume 500mbps) is broken down for multiple residents use.  At 20/5 speeds, with only lower speeds guaranteed (remember the fine print), they can put up to 100 customers on one pipe.  100 customers @~$115 per month equals $11,500 in access fees.  This leaves the carrier with a tidy profit.

The true Business Class pipe is typically priced in the $4,000 (based on bandwidth & distance to the central office) range per month, equaling the price we talked about earlier to provide the 500mbps capacity and maintain a reasonable profit level in the residential neighborhood.

There are certainly other factors that go into the access costs and reasons behind it but we’ve touched on the high points.  As many carriers have exited the small to medium size business markets and no longer maintain a field sales staff due to profitablility issues, be cautious when working with a field sales rep offering "Asynchronous" service as "Business Class".  It's true, it comes at a lower price, but you get what you pay for.

If you need additional info or have questions, please let me know in comments and I will try and address them.  If you want to contact me directly to discuss the options you may have for internet and/or cloud access for your business, please complete my “For more information” form or email me at Dave@davehanron.com

Part 2: "SaaS" vs "PaaS" vs "IaaS"

In my previous segment, we covered a general overview of “Cloud Services”.  We mentioned “Public and “Private” clouds, and gave some examples of each type.

In this chapter, we will be discussing “Cloud Computing”.  There are 3 major types of “Cloud Computing”:

                           Software as a Service (SaaS)

                           Platform as a Service (PaaS)

                           Infrastructure as a Service (IaaS)

Here's a basic screenshot of Expedia

Software as a Service (Saas) should be a familiar term to many of us.  Loads of sales folks lay claim to selling “SaaS” services.  But what exactly is that?  SaaS refers to a program where the Customer utilizes a platform belonging to a provider (the company who owns the application) which runs on a cloud service infrastructure.  A good real world example of “SaaS” would be the travel service provided by Expedia.  The consumer goes to Expedia's website and enters information on the destinations, dates, and times for their travel and Expedia’s “SaaS” returns available options to choose from and offers booking capabilities.

Zimbra is a type of "Paas"

Platform as a Service “PaaS” is a bit more complex.  In “PaaS” a company can create their own applications and merely run them through a provider’s platform.  A popular example of a “PaaS” in use today would be Zimbra Desktop which enables a person to aggregate accounts across platforms (like Gmail, Yahoo Mail, Zimbra) and social accounts (like Facebook and Twitter), to make reading and posting information more simple.

Infrastructure as a Service (IaaS) clouds are created consisting of virtual machines (servers, storage, routers, firewalls, etc) which are made available to companies on demand to run their own in-house applications.  The hardware is housed in a "Data Center".  These applications are harder to identify, as one of the main purposes of IaaS is to allow the company to give the impression the platform is exclusive to their company and hosted and maintained by their staff.

The major advantage to IaaS is additional servers and storage may be configured in minutes, not days or weeks, and allows almost instant growth of network resources.  Multiple platforms can share a single physical server, but be completely isolated from one another, ensuring a totally secure computing environment.

The ability to run multiple platforms on a single server creates tremendous cost benefit to a customer.  There is little CAPEX (capital expense) associated with additional capacity and the finance department can “pay as they go” for resources (CFO’s are thrilled with this!).  With the proper provider, customers can benefit from virtual control panels, firewalls, nearly unlimited storage capacity, and many other features.  All this comes with savings in energy consumption, real estate costs, network, hardware expenditures, and dollars spent on IT resources.

In the next segment, we will explore the world of “IaaS” in greater detail, touching on additional specifics and overall cost efficiencies available.

I’m always available to assist individually should you have “cloud” questions prior to my next entry. Please either email me at dave@davehanron.com or complete my form for “More Information” located on the side of my blog page.  If you have any comments or questions, they can also be entered in the comments section below.

The Next Chapter in Outsourcing...

In many of my previous posts, I’ve addressed some of the networking angles and options for “Business Process Outsource” or “BPO” products.

I’d like to take an opportunity to begin series of posts on some of the processes behind the network which are available for you to take advantage of, namely “The Cloud”.

Let’s start by explaining exactly what “Cloud Services” are.  Here is the official definition from Wiki:

“Cloud computing is the use of computing resources (hardware and software) that are delivered as a service over a network (typically the Internet). The name comes from the use of a cloud-shaped symbol as an abstraction for the complex infrastructure it contains in system diagrams. Cloud computing entrusts remote services with a user's data, software and computation.”

As a simple example of how you may already be using “Cloud Services” in your day-to-day activities, if you use online banking services to pay bills, write checks, or simply check your account balances, you’ve entered a “Cloud” provided by your banking institution.

There are many types of “Clouds” to consider.  The first type would be a “Public Cloud”.  Public Cloud services are those that are available to the general population and are available for free.  Some of the better know “Public Cloud” applications would be Hotmail (hosted by Microsoft) and Gmail (hosted by Google).  Services which are available in the public cloud range from email, to blog hosting, to data backup, and to calendars, etc.  

The second type of “Cloud” would be the one I am going to discuss in the next few posts from “The Business Outsource Guy”, namely “Private Clouds”.  Private clouds are just what the name implies, a private version of the public cloud, designed and installed for a particular business.  Private clouds have tremendous flexibility and can offer not only revenue savings but also peace of mind for a company.  Private clouds off-load the responsibility for a business’ primary operating systems to a hosted solution provided by a 3^rd party vendor.  By outsourcing to the cloud, a company can realize operating and cost efficiencies.  It frees up valuable resources in both the IT and technical staff, which can be better utilized to help close new revenue producing sales and installs.

In my next few posts, I’ll try and focus on some of the specific programs available through the use of a “Private Cloud”.  There are many services which can be incorporated into the cloud, including email, IP phone technology, internet security, asset management, laptop security, anti-virus protection, software license compliance, disaster recovery, data back up and archiving, encryption, and many more….. Plus the “Cloud” can provide security for a business to allow secure access, both remote and mobile, to their internal platforms, easing strains on their internal IT department.

Check back for the next chapter on “Cloud” services coming soon.  If you have any particular service you would like me to address, please let me know.