Case Study: Hosting Company
Background & Business Challenge
NEF needed to connect a suburban hosting facility to a metropolitan carrier hotel with high-capacity bandwidth. The web hosting company manages a data center in a suburban community and offers shared hosting solutions, managed dedicated servers, shared ASP services and colocation.
Web hosting is a highly commoditized service within a competitive market place, and many of the end user customers' decisions are based solely on price. One of the key factors for being a price leader is to be able to secure Internet bandwidth at a competitive price. The low-cost bandwidth providers are all located at the major telecommunications carrier hotels found in the metropolitan area. In order for this hosting company to get low cost bandwidth they had to purchase a circuit from the Local Exchange Carrier (LEC) which drove their cost of bandwidth above that of their competitors.
The hosting company was buying OC-12 SONET circuits from the LEC for roughly $20,000 month and purchasing bandwidth at the carrier hotel for $18 per meg. The total cost of bandwidth was $40 per meg. The growth of the company's bandwidth needs required them to purchase an OC12 every 120 days.
NEF did the research and provided a dark fiber solution for the hosting company. This solution allowed the hosting company to deploy a 10 Gigabit ring connecting the data center and the carrier hotel. After a capital investment of just under $100,000 for the construction of fiber laterals and equipment, the monthly cost of the dark fiber ring was $12,000 month. The 10 Gb ring has the capacity of 16 OC12 circuits for a fraction of the cost of lit services.
The hosting provider's total bandwidth costs were now less than $20 per meg, less than half of their original costs, allowing them to be competitive in the hosting market.
"The escalating costs of bandwidth were really hurting our ability to remain cost competitive. The solution that NEF provided fit all of our needs and completely changed our cost structure for the better. When they say better, faster and cheaper, they mean it."