Tech is Not a Race to Zero!
Tech is not a race to 0. So there's this conversation I've been having or seen online a lot lately, and it centers around the cost of Internet circuits specifically and some other things as well, talking about how there's a general race to 0 in markets. And so, Internet circuits, network circuits, you know, if if you're on the one side of the fence, you believe that it's a race to 0 and all these suppliers are just doing crazy stuff and and just eventually gonna give the stuff, you know, the stuff away for free. It's not a race to 0 because that would connotate that it's a a margin compression or race to 0 margin as well. In fact, like, margins are actually improving for a lot of these businesses, not decreasing.
Speaker 1:What's actually going on here is that tech is is doing 2 things when we talk about tech. Right? So tech is always improving and innovating, and it's always becoming more efficient. And I'm gonna give you two examples for this that you can think about. But the first example, worldwide PC costs.
Speaker 1:Worldwide PC shipments over a span of, I don't know, last 15 years, average cost per PC is $733 every month. Every year, every unit, worldwide, $733 year over year over year. You can maybe you equate to this in Apple. Right? When, a new iPhone comes out, you know, now, of course, there's tiers between, like, the standard iPhone and the Pro iPhone and the Pro Max iPhone or or let's just use a a simple one, a MacBook Air.
Speaker 1:A MacBook Air cost $999. That's what it costs. Cost that last year, cost that the year before, cost you the year before that. Each year, that MacBook has gotten faster. It's had more RAM.
Speaker 1:It's had a faster hard drive. It's got a better screen. It's got, faster graphics chips. That laptop has improved every year, but that selling price has stayed the same at $1,000. Why?
Speaker 1:Well, because the tech has improved. As tech improves and units shipped and and and quantity of units shipped increase, cost for those components decrease. Not a hard thing to figure out. Right? So let's talk about network, and this is what really stemmed this recording for me here.
Speaker 1:The average my house. I've got a I've got a 1,000 meg GPON service in my house. I have a 1,000 meg symmetric fiber optic service in my house. Like, it's it's nuts. I mean, my first Internet connection was a 1200 baud modem.
Speaker 1:So fan of my lifetime, I've gone from a 1200 baud modem to a 1,000 megabit Internet circuit. Right? Like, it's just astronomically phenomenal what the what the what that actually means. We're turning on and lighting circuits for clients right now at 800 gigabit, 800 gigabit per second. A 100 gigabit circuits in metro, sub $5,000 depending on things.
Speaker 1:I mean, I've seen these things as cheap as $3,000 lately. And and chances are, you know, it's February 23. 2 years from now, we're gonna look back on this video, and it's gonna be like, oh, look. I'm getting an 800 gig circuit for $500 in metro. And and that's what we expect because what happens?
Speaker 1:What's the cost of these things? Well, the cost of this stuff is components. How much does the line card cost in a router? How much does the optic cost? All these things as the new equipment comes out, the newest thing is always the most expensive.
Speaker 1:Just think of it this way. Right? So when 10 gig first came out, it was the most expensive thing that you could get. It was the best thing you could get. So what happened?
Speaker 1:Gig got cheaper, and a 100 meg was cheaper. And 10 meg, if for whatever reason you were buying it, was super cheap because those components were so commoditized and so easy to manufacture that they were very inexpensive. When we look at and we talk about, Internet for an office, majority of offices have maybe a 100 megabit circuit in them. Well, that circuit, they haven't increased the speed of that circuit over the course of the last 5, 6, 7, 8 years. So every year, what happens is that circuit gets cheaper.
Speaker 1:It's cheaper every year. Maybe you upgraded to a 1,000 meg circuit. You know, 3, 4 years ago, we were selling a 100 meg Internet circuits would probably cost, you know, $1,000. Right? And now you can buy a 100 meg DIA circuit for $800.
Speaker 1:And and in 2 years, you're gonna buy that 100 meg DIA circuit $400. But at the same time, different technology becomes available. You know, I mentioned I have a 1,000 meg GPON service at my house. Ten gig GPON is available. I know companies providing 10 gig GPON today in the markets that they operate in.
Speaker 1:So if you're if you're in market and and you you're in one of their territories and you can get, you know, GPON x or GPONNG, I think are the actual codes, but somebody's gonna correct me that. Please comment and and correct me on this. You can get a 10 gig GPON service, and it's gonna be dirt cheap because it's super efficient and inexpensive for that provider to bring that service to you. This isn't a race to 0. This is just a race to efficiency, and this is just a race to, you you know, commodity components being cycled out.
Speaker 1:And for the companies that need faster speeds, the faster speeds are are becoming readily available and are cheaper. You know? So what was a 100 meg became a 1,000 meg is now, you know, a gig, became 10 gig. So it's gonna be common. We're gonna see offices with 10 gig in their offices.
Speaker 1:It's gonna be phenomenal. They're gonna have plenty of bandwidth in their office. They probably won't go to a 100 gig in their office for a little while, but then at some point, we're gonna have office campuses with with a 100 gig in their offices. And people are gonna wanna go to the office to work because it's gonna be so fast to be on the Internet at that point. But, you know, meanwhile, 800 gig is available in backbones.
Speaker 1:You can buy 800 gig today if you need it between data centers. 400 gig is pretty common. 100 gig is really it is is cheap. You know? Go out and buy a 100 gig.
Speaker 1:Light 100 gig, do 100 gig. It's super inexpensive for you to have 100 gig circuits now. As these circuits increase in speed, you know, each tier will just get cheaper. You know? Next year, you know, what's a 100 gig now?
Speaker 1:In 2 years, it's gonna be 400 gig. In 2 years, it's gonna be 800 gig. So, it's only a race to 0 if user consuming it doesn't increase with it. Right? So it it it only this perception of race to 0 is just misplaced.
Speaker 1:It's not a race to 0. It is just the efficiencies of tech in play and commoditization and manufacturing capability of global fab plants being able to push out components and chipsets in mass quantities that are inexpensive and and available for operators to run and go out and and build services around it. So enjoy it. If you only need a 100 meg or a 1000 meg in your office, you know, fantastic. Good for you.
Speaker 1:Every year, you're getting cheaper service, and every year should be in the market buying and signing new contract and lowering the cost of service to your business. And at some point, you know what? Ten gig is gonna get so cheap, and you're gonna look at it and say, oh, whatever the what the heck? Let's just go ahead and upgrade a 10 gig because it's so cheap, and I don't know what I'm gonna do with it, but why not? You know, we might as well try it because it's available.
Speaker 1:So don't look at this as a race to 0. It's not a race to 0. It's all good for you, the consumer of these goods.
