CDNs make money by selling three different services 1) data transfer (transit) plans 2) features such as WAF and 3) consulting services. When it comes buying transit from carriers and selling it to customers in the form of data transfer plans, confusion tends to set in when converting 95/5 into data transfer, expressed as GB/month (Gigabytes). In this brief, we’re going to look at the conversion math for transit. CDNs buys transit from carriers in 10Gbps increments, meaning they buy a 10Gbps Internet Port (burstable) on a minimum monthly commit (usually 10% of port capacity) from multiple carriers.
The basic unit of measure for converting 95/5 transit into GB/month is 1Gbps. Thus, 1Gbps = “x”/month (“GB”/month). The interesting part is that the “x” differs between CDNs. We’ve seen some CDNs use a conversion rates of 300TB/month for 1Gbps and other CDNs use 100TB/month for 1Gbps. In another words, conversions are all over the map. The bottom line is if conversions are off, then pricing and margins are wrong. In the exercise below, we’ll do conversions from scratch and cost it appropriately.
95/5% Conversion into TB per Month
- 1Gbps = 1,000,000,000 bits per second (Giga = billion)
- 1,000,000,000 bits per second divide / 8 bits = 125MB per second (8 bits = 1 byte)
- 125MB per second x 60 seconds x 60 minutes x 24 hours = 10,800GB per day
- 10,800GB x 30 days = 324,000GB per month (30 days is the number of days many carriers use in their 95/5 calculations)
- 324,000GB / 1,000GB = 324TB per month
- Important note: When it comes to transit – IP overhead, jitter, and latency must be taken into account for costing purposes, because packet loss reduces the actual bandwidth available on an Internet Port (circuit)
- Some carriers factor a packet loss as high as 40% on each circuit. Thus, if 1Gbps = 324TB and packet loss is 40%, which is 129.6TB of packet loss . That is the reason the conversion rate differs between CDNs. However, it should differ that much
The 5% in the 95/5 % Calculation
- Many carriers use the 5 minute sample. Thus, most carriers take a sample of traffic every few minutes in the billing cycle for pricing purposes
- Total samples in a 24 hour period: 60 minutes x 24 hours = 1,440 minutes / 5 minutes = 288 samples
- Total samples in month (30 days): 288 samples x 30 days = 8,640 samples in a month
- 5% bursting above monthly commit in the 95/5 model is discarded by carriers for pricing purposes: 5% x 8,640 samples = 432 samples discarded
- CDNs can burst above monthly commit for 36 hours (5 minutes x 432 samples) and pay no overages. If a CDN exceeds that period, they pay overages
- If a CDN buys a 10Gbps Internet Port with 1Gbps minimum monthly commit, and burst above 1Gbps for 40 hours, overages will be charged
- Carriers set billing on the 433rd sample
Costing Example
- CDN buys a 10Gbps Internet Port (1Gbps minimum monthly commit) from Carrier ABC at $25/Mbps (expensive country)
- Minimum monthly cost is $25,000/ month (1,000Mbps x $25/Mbps)
- $25,000 / 200,000GB (200TB) = $0.125 per GB. This is the transit cost to a CDN
- CDN will add margin to the $0.125/GB and sell it in the form of a data transfer plan
