Economics of Fractional Bandwidth
Contrary to expectation, fractional bandwidth doesn’t always offer lower pricing
By: John Shepler
If you need and want professional-grade telecom line services but don’t need the full line rates, can you save by ordering fractional rates? Conventional wisdom says yes. Reality may be different.
Why Fractional Bandwidth?
The idea behind fractional bandwidth is that it ought to be cheaper to buy less than the full line rated bandwidth. For instance, the smallest line service you can generally get with dedicated bandwidth and a service level agreement is the T1 line. These used to be very expensive and cost over $1,000 even in metro areas. At the same time, bandwidth demands in many smaller companies weren’t all that high. Something like 500 or 750 Kbps was plenty for email and text file transfers. Seemed a shame to have to pay for 1.5 Mbps and not make full use of it.
That’s where the idea of fractional T1 lines came from. If you don’t need and can’t afford 1.5 Mbps, then why not order a T1 line but only have it deliver a fraction of the full bandwidth? There should be a cost savings, since the service provider didn’t need as large a backbone network to serve many customers who are only running fractional T1 lines.
But Is Fractional Cheaper?
Well, yes and no. It’s true that Internet access has a port cost of so much per Mbps. But what about point to point dedicated lines? Is there really any savings to throttling back a line that’s used for only one customer? Plus there is the basic cost of the line itself. A T1 line runs synchronously at 1.544 Mbps whether it is carrying any traffic or not. That’s the basic technology. The pipe, if you will, has a certain diameter regardless of how much is flowing through it.
Cost Savings Compared to Bandwidth Reduction
At any rate, many telecom service providers have offered fractional T1 lines and fractional DS3 service to accommodate customers who can’t pony up the cost of full line speed. This may have as much to do with marketing as anything else. The cost has never been scaled as much as the fraction of maximum rate. In other words, you can order a half-speed fractional T1 line but pay three-fourths or more of the price for a full T1 line.
Fractional Can Even Be MORE Expensive Than Full Bandwidth
Now it’s becoming more expensive in some areas to get fractional line speeds as it is to simply order a full T1 line. Why? It’s because a T1 line is a standard product and the fractional service is a special order that needs additional engineering. In that case, you might as well order the full T1 line and just not use all the capacity. It’s cheaper.
Limited Scalability Issues
Traditional switched circuit telecom services such as T1 lines, DS3 connections, OC3 fiber optic service and the like never were very scalable. They were designed as a technology family with large standard increments between the service levels. But there is a newer service that may be just what you are look for in the way of bandwidth scalability. That’s Carrier Ethernet.
Ethernet Offers Easy Scalability
Carrier Ethernet, also called Metro Ethernet, was designed from the beginning to be highly scalable. There are standard network speeds, such as 10 Mbps, 100 Mbps and 1000 Mbps, but there are a plethora of in-between bandwidth levels available. Popular Ethernet service levels are 2 Mbps, 5 Mbps, 10 Mbps, 20 Mbps, 50 Mbps, 100 Mbps and above.
What’s important with Ethernet is to have a port installed that can handle the maximum speed you expect to want. Then buy just the bandwidth you need right now and upgrade later. If you’ve got the right port in place, you can often upgrade your bandwidth quickly and easily with just a phone call to your service provider.
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