Wired has a great article about the way that the economics of the way the infrastructure of the Internet is changing. Whilst there have been some estimates that YouTube is costing Google billions of dollars in terms of the bandwidth required to show videos. However, this article points out that Google owns a large amount of fibre optic and is likely to be trading traffic with ISPs, meaning that the marginal cost of YouTube's output could be close to zero.
The article also highlights the way that the infrastructure of the Internet is changing. For example, in 2007 the majority of the of the Internet's traffic came from 30,000 blocks of servers, by 2009 this had dropped to just 150 blocks. The speed of the change is staggering and the implications for the economics of the Internet profound.
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