Cogent Slashes Bandwidth Prices

Cogent Communications (CCOI) has slashed its already low prices for Internet bandwidth, hoping that lower pricing will accelerate the shift of video programming from cable TV to the Internet. Cogent says it expects the new pricing will help gain market share from its rivals, primarily Level 3 (LVLT) and Global Crossing.

Cogent bandwidth is available in 325 data centers, which represent half of the company’s business. Its basic rate of $10 a megabit is well below its competitors, and the company has begun offering even deeper discounts for customers with multi-year, high-volume contracts. Last month Cogent lowered its base rate for a three-year contract to $7, with rates as low as $4 per megabit for customers who commit to a 10-gigabit Ethernet connection. To protect itself, Cogent has stipulated that existing customers only get the lower rate if it results in a larger monthly spend with Cogent – meaning they will probably need to buy more capacity.

“In order to accelerate the adoption of these business models, we felt more aggressive pricing for large volume applications made a lot of sense,” said Cogent CEO Dave Schaeffer. “We’re in an environment where Internet traffic growth is slowing, and while we believe this is temporary, we want to stimulate Internet growth.”

‘Growth Is Slowing, Hype Is Accelerating’

In a post titled “Internet Traffic Growth Doesn’t Matter,” Andrew Schmitt from Nyquist Capital raises some tough questions about popular assumptions for network traffic, particularly from Internet video. Andrew is recapping the Gilder TeleCosm conference, and in particular a presentation by Andrew Odlyzko from the University of Minnesota.

Odlyzko will be familiar to many readers with memories of the dot-com boom and bust, as he was among the first to challenge the oft-repeated contention that Internet traffic was “doubling every three months.” In his presentation at TeleCosm, Odlyzko observed that “Internet traffic growth rates are slowing. Hype is accelerating.”

Some of the hype is intertwined with the network neutrality debate and the assertion by some analysts and providers that Internet capacity will be strained by the robust growth of online video and large-file data transfer. Odlyzko’s Minnesota Internet Traffic Studies (MINTS), which aggregates traffic data from a number of sources, estimates overall Internet growth rate at 50 to 60 percent per year. His presentation suggests a mixed picture – there are huge potential bandwidth drivers on the horizon, but Internet traffic is actually slowing in several high-bandwidth markets.

11.5 Billion Video Streams in March

More than 11.5 billion videos were streamed in the U.S. in March, according to a new data from ComScore (via Contentinople). That’s a 13 percent increase from February, and up 64 percent from one year ago. The average online viewer clocked in 235 minutes of video, or about four hours. See the ComScore web site for additional details.

The data center business is doing its part to contribute to the growth of online video, as can be seen at our DCK video archive, the Data Center Videos channel on YouTube, and also at Data Center Journal’s new DataCenter.tv.

$461 Million for Online Video Startups in 2007

Venture capitalists continued to pour money into online video startups in 2007, even as they were scaling back their investments in most other sectors. NewTeeVee reports that $460.5 million was invested in 68 video startups in 2007, up from $266.9 million in 2006. The pace of VC investment accelerated in the first quarter of 2008, with another $217.3 million going to 29 video startups, which projects to $868 million for the full year. That bucks the broader trend, as overall venture capital investments in 1Q 2008 declined 9 percent from previous quarter and 8 percent from the year-earlier period.

What does this mean for the data center sector? These video startups need infrastructure for hosting, peering and content delivery, and the VC investment provides these companies with capital to invest. The trend certainly bodes well for the CDN sector, and will probably helps sales of 10 Gig Ethernet ports at Equinix (EQIX) and other peering hubs. The downside? Not all of these companies will survive.

BBC Streaming Causes ‘Bandwidth Explosion’

Will Internet streaming of network TV shows break the business models of ISPs? An early experiment in the UK raises hard questions about that prospect. British ISP PlusNet reports explosive growth in bandwidth usage since the December launch of the BBC’s iPlayer, a Flash app that streams the network’s video programming. Dave Tomlinson from PlusNet said the ISP’s cost of carrying streaming traffic has tripled since the iPlayer was launched, driven by a 72 percent increase in the number of customers streaming at least 250 GB per month.

The iPlayer service makes BBC programs available for free streaming over the Internet for 7 days after they air. Entire programs are available for streaming with no time limit, unlike the 10 minute limit for most YouTube videos. The service is being heavily promoted by the BBC broadcast networks.

The Telco 2.0 blog offered an analysis of how the iPlayer’s popularity will impact British access providers:

The obvious conclusion is that ISP pricing will need to be raised and extra capacity will need to be added. The data reinforces our belief expressed in our recent Broadband Report that “Video will kill the ISP star.” The problem with the current ISP model is it is like an all you can eat buffet, where one in ten customers eats all the food, one in a hundred takes his chair home too, and one in a thousand unscrews all the fixtures and fittings and loads them into a van as well.

The PlusNet data, and Telco 2.0’s analysis, is being discussed at The Register and Slashdot, as well as on the BBC Internet Blog.

Online Video Gains During Writers’ Strike

The writers’ strike may be accelerating use of online video, according to several new reports. Internet metrics firm Nielsen Online says YouTube’s audience has grown 18 percent in the two months since the strike started, while some smaller some online video sites have doubled their audience.

The Neilsen report reflects an acceleration of the already powerful growth of online video. A report issued Wednesday by The Pew Internet & American Life Project documented strong year-over-year adoption iof online video. Here are some of the details:

• 48% of Internet users said they have visited a video-sharing site such as YouTube. A year ago, in December 2006, 33% of internet users reported visiting video sites. That represents growth of more than 45% year-to-year.
• 15% of respondents said they had used a video-sharing site “yesterday” – the day before they were contacted for the Pew survey. A year ago, 8% had visited such a site “yesterday.” Thus, on an average day, the number of users of video sites nearly doubled from the end of 2006 to the end of 2007.

The Serverless Startup

This week’s NewTeeVee conference was the coming-out party for Mogulus, a new online video provider that launched its service with a live video feed of the event. Today Robert Scoble highlights the unusual aspect of Mogulus’ operation: it has no servers of its own and runs its entire infrastructure on Amazon’s utility computing services, S3 and EC2.

“The world has changed,” Scoble writes. “Now ANYONE can build an Internet company and get it up to scale. No more spending nights inside data centers trying to keep servers running.” He also notes that Mogulus got $1.2 million in funding. Mogulus CEO Max Haot told Scoble that the environment is “volatile” and can go up and down without notice, and that it has designed its systems accordingly. Amazon (AMZN) recently introduced a service level agreement for S3 that includes uptime guarantees.

YouTube: 10 Percent of All Internet Traffic

Wondering how the rise of online video will impact Internet capacity? According to data released this week by Ellacoya Networks, YouTube now accounts for 10 percent of all Internet traffic, and 20 percent of all HTTP traffic. Here’s a breakdown of Ellacoya’s data by type:

• HTTP traffic 46%
• P2P traffic 37%
• Newsgroups 9%
• Non-http streaming video 3%
• Gaming 2%
• VoIP 1%

The study has gotten attention because it finds that P2P traffic is no longer the largest component of Internet traffic. Some in the P2P community are contesting that claim, as though P2P had lost some sort of network-clogging bragging rights. But it seems to me that the numbers are all about the rise of video, not the decline of P2P.

YouTube, MySpace Clog U.S. Military Network

The U.S. Department of Defense has begun blocking access to MySpace and YouTube on its network, saying heavy use of the video-centric social media sites was degrading its network performance. “This is a bandwidth and network management issue,” Julie Ziegenhorn, spokeswoman for U.S. Strategic Command, told Stars & Stripes. “We’ve got to have the networks open to do our mission. They have to be reliable, timely and secure.”

The article notes that military commanders acknowledge that many of the sites being blocked are used by troops to keep in touch with family and friends. “This recreational traffic impacts our official DOD network and bandwidth availability, while posting a significant operational security challenge,” wrote U.S. Forces Korea commander Gen. B.B. Bell in a message to troops.

Many troops stationed overseas use the DoD network to access the Internet, but some others use local providers. Ziegenhorn said the sites were becoming “a drain on the system,” but the Stars & Stripes story also mentions security several times. MySpace has been a regular target of phishing scams seeking to steal account credentials.