There is an interesting graph making the rounds on the Internet. It shows the changing source of demand for international bandwidth. At first blush, this speak to the rising importance of things like video on the Internet, which is true, but we think there is a much more profound takeaway from the chart that speak to the rewiring of much of the modern world.
This graph was produced by Telegeography who get to make incredible maps showing the world’s subsea fiber connections, and write Halloween themed blog posts on whether Facebook is haunted. This chart was presented in a great video by the analyst Andrew Mauldin who created it. The video gets full credit for presenting a sound analysis and then looking at all the ways iy could be wrong. Plus bonus points for some very solid Scooby Doo memes.
The chart shows bandwidth consumption shifting away from Internet Backbone Providers to “Content Providers”. Internet Backbone Providers are telcos, or their long-haul descendants, the companies who used to build all of our telecommunications infrastructure. In most of the commentary we have seen on this chart, people assume that “Content Providers” means Netflix, YouTube and Facebook. This is true up to a point, as these companies are the ones ultimately creating and serving the content, but if you read the notes on the presentation, content providers are a much broader universe. Telegeography’s clients are people building or buying bandwidth, including everyone laying fiber and then providing points of connection, hubs, for all those fiber strands.
We are all familiar with the idea that the big Internet companies are trouncing traditional media, and so we read that into the chart. But less understood is how all the content goes from the source to our phones, PCs and tablets. So in this context, “Content Providers” includes CDNs, Internet Exchange Points, and a host of other intermediaries. Not so long ago, these were all “telcos”, regulated entities with legacies as national monopolies. As we wrote about way back in 2013, that legacy telecom stack is steadily being dis-articulated, taken apart limb by limb. So this chart is less about the way that video is overtaking voice on our communications network (that ratio flipped a long time ago), and instead is about who actually controls the infrastructure for communications.
The best analogy we can think of is the US motion picture industry in the early part of the 20th Century. The original movie studios also owned all the movie theaters. They controlled both the content and the distribution. This proved highly anti-competitive, and the US government eventually forced the studios to sell off the theaters. At the time, the industry bemoaned the loss of the most profitable arm of their businesses, and it took a decade or so for them to realign the economics sharing, which led to a huge boom in movie viewing – to the point that on average every American was going to the movies once a week.
Underneath all of that change above is the fact that so much of the new bandwidth under construction is being funded by the big Internet companies. If you look at the fiber, CDNs, and exchange points that Google, Amazon, Microsoft and now Facebook are financing it looks a lot like a repeat of the early days of the movies. It is probably too early to get overly alarmed about this. It will be at least a decade before the regulators even notice this, but there are so many other constituents here, that the big companies do not have a lock on this, yet.
However, it does speak to the way that so much of the underlying infrastructure of the modern world is steadily changing hands. This can be viewed from a technical level as the rise of packet based switching overtaking circuit switching. It can also be viewed as one more example of Software Eating the World. Or it can be explained as a mismatch in profit sharing, with the Internet companies earning outsize profits, allowing them to afford this purchase. It is a combination of all three, and probably a few other factors. This is going to force us to rethink a lot more than just how we watch videos. It will rewrite the structure of many industries. In an upcoming piece we will look at what this means for the telecom companies, but they are just the first to feel this.
More fodder to support the crypto narrative. Also interesting to think about this in terms of the metaverse narrative
Metaverse means a lot of different things, but I think that AR is going to drive a massive increase of network demand. – multiple data layers to overlay on top of reality – it’s a lot of data. But that level of AR is still far away.