What is bandwidth? Picture a hose. If you need to move millions of gallons of water through a garden hose, it’s going to take a long time. If you have a fire hose, it will be a shorter amount of time to move the same amount of water. In the same way, your “pipeline” to the internet is measured in Mbps. This is like measuring how many gallons per minute you can move through a hose. If you only occasionally use email and websites, a garden hose might be fine. If all your data resides on an onsite server, a garden hose might be fine, but if you keep all your data somewhere else, you might eventually need a bigger hose, and that can become expensive, especially for a business.
A customer of ours recently opened a conference space in Downtown Los Angeles. In a residential loft. Although it was a small office, we recommended that they order a package with 300Mbps of downstream bandwidth, even though that’s faster than some local area networks can even communicate. Why? Because it was zoned residential, and the cost was something like $79. Believe it or not, that same customer has an office in a high rise building with only 15Mbps of downstream bandwidth, and we had to fight with their carrier to get them a price that’s around $1,500 per month. How is this possible? Why are commercial internet connections priced so differently than residential ones?
The disparity is creating a problem for many of our customers because if people are getting 100Mbps plus at home for just themselves, and sharing 5Mbps at work with 20 people, it can be so much slower for certain types of tasks that it seems like it’s broken. Effectively, if you like the water analogy, they’re using a garden hose to pour everyone a glass of water at the same time. As people transition to more cloud services and away from traditional infrastructure, (e.g. using dropbox for file sharing instead of a server, offsite backup, video conferencing, etc.) that connection to the internet can become a bottleneck in the way of productivity, which is kind of great news for companies that sell bandwidth.
We are asked this question so frequently now, that it seemed like it would be worth explaining, so here are 6 reasons why business internet costs more than residential or consumer internet packages.
1. Static IP Addresses
If you want to host infrastructure at your workplace, such as a mail server, a file server, heating and air conditioning controls, video cameras, etc. you need a destination address to point to. If you want an internet address like brightbear.com to resolve to a server, you have to be able to tell the internet (via a DNS server) where that traffic should go. Residential internet connections are a moving target. They change your address on the internet constantly to prevent you from, well, having business infrastructure. There are workarounds for people who want to do this anyway, but they are more complicated and less reliable than the convention of having a fixed address that doesn’t change every couple days. Static IP addresses are also becoming scarce. In the old days, they would hand out a block of 20 addresses to anyone, and now we have to tell the carrier why we need each address and what it is for. If you have on premise infrastructure, you would typically need a business internet connection.
2. Upload and Download Speed Parity
Another way residential and even some business internet providers keep prices down is to offer fast download speeds and much slower upload speeds. For the way most people use the internet at home, streaming movies, loading websites, and consuming content, download speed is what matters. If you want to create content and send it to the world, upload speed matters. If you want to back up your data offsite, upload speed matters a lot. Typically, commercial internet connections offer the same upload speed as download speed. On residential connections, upload speed is almost always throttled. A lot. 20Mbps down, 2Mbps up is a common package. This is abbreviated sometimes as 20×2 or they will just advertise the download speed, causing further confusion.
3. Direct vs shared connectivity
If you order fiber, a T1, or even SDSL, what you’re getting is a direct connection from your office to your carrier. A cheaper way to do it is to run cable or fiber into a neighborhood, and add a neighborhood gateway. Sure, if everyone is online, it might lag a bit, but it saves the carrier from the time, expense and maintenance of having a direct connection to every customer. Better yet, if you order internet connectivity, they can just walk over to your neighbor’s house and tap into their connection! Business internet carriers don’t typically daisy chain connectivity this way, but it’s common for residential. If you read the fine print on residential data ads, it says that results may vary, and speeds are not guaranteed. On a business grade connection, typically the speed is contractually agreed upon.
ISP’s are smart. They know that most homes are going to not use their connection in the middle of the night, and they’re not going to use it during the afternoon. Mostly, residential connections are used in the evening, and only for a few hours before people go to bed. Because residential connectivity is shared, this means that ironically it may perform *better* than advertised during off peak hours. Conversely, if an ISP sells connectivity to a business, they assume that 30 people are going to be on that connection using every ounce of available bandwidth, basically all day long. Commercial connections are often saturated, while residential connections are only generally only going to be used evenings and weekends.
5. Service Level Agreements
If you buy business internet, you typically get a “SLA” which means they have to refund your money if they don’t deliver the services as agreed. Response times are measured and short, and you typically are supported by professionals rather than entry level workers in a call center reading a script. Residential connections are “best effort” which means it might be down for a few days from time to time, but they will solve the problems as quickly as they can.
6. Because They Can
If your location is zoned commercial, you can’t get residential internet. It is something to consider if you’re moving out of a home office, but generally you’ll find that you can’t get residential pricing and service in an office or business, and it’s challenging to get commercial service at your house. By forcing commercially zoned properties to buy business internet, carriers get to sell their best service level without having to defend its value. Some carriers do offer a “SOHO” or home office package that offers some of the features of a business data connection, but it’s such an unusual request that a lot of residential internet salespeople aren’t even aware that those packages exist.
In summary, for some reasons that are fair, and some reasons that are unfair, business internet costs quite a bit more than residential internet. As people do more and more in the cloud and as expectations rise, a lot of companies are going to have to make tough choices about funding allocation. If your data is not in your office, that internet connection can become a very important bottleneck in your business.