Why Aren’t ISPs Surfing Moore’s Law?

Back in the mid-90s, I bought a new family PC for $3300. It had a few MB of RAM and a 386 processor.  In today’s dollars, it cost nearly $5000 — try spending that much on a PC today!

Recently, I built a machine with 32GB of RAM, a fast 4-core Intel processor, and 12TB of disk (raw size).  It is several thousands of times larger and faster in nearly every dimension than that old family PC, at less than half the cost.

Moore’s Law has settled in, and we now expect our technology to get dramatically faster, more capable, and cheaper over time. Flip phones are gone, and we’re carrying around personal supercomputers.  My phone’s built-in cameras (plural!) have better performance than my first digital cameras.  Ethernet went from 10mbits, to 100, and now a 5-port gigabit switch costs $18.  Compare the current model iPhone to the original, and a $500 TV to the same-priced model a few years ago.

Given this, why isn’t our Internet bandwidth keeping up?  Verizon just notified me that my monthly rate is going up $10 (with no speed increase).  As I wrote last week, Netflix has reported a speed drop in some cases and is now trying to figure out its relationship with ISPs.  Akamai reports that US speeds have stopped increasing in some cases, and are increasing more slowly in many other cases.  Projecting my PC experience, my Internet connection should now be a gigabit and cost $50/month.  Why isn’t it?

ISPs argue that networks are incredibly expensive to build.  That’s true: ISPs have spent tens of billions building out fiber networks, and governments have offered significant incentives.

But fiber is special:  unlike copper circuits, fiber bandwidth is usually limited by the endpoint technology.  Where DSL is often running as fast as the copper can stand, fiber links have much, much higher potential bandwidth.  The price-performance of endpoint gear (subscriber terminals and core routers) improves at rates closer to Moore’s Law.  For example, Verizon’s own FiOS terminals have moved from 622 mbits to 2.4 gbit link speeds since they first rolled out the service.

For the fiber now in the ground and on the poles, why isn’t bandwidth price-performance improving more quickly?

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