The Cloud Price Calculator (http://cloudpricecalculator.com) addresses this by adopting Amazon’s ECU as the compute metric at 1ECU = a 400 Passmark score.

Combining all the resources and dividing by price yields the Cloud Price Normalization index and a ranking of cloud offers. Interestingly, the ranking shows Amazon’s newer instances provide more value than the older ones as Amazon has rarely reduced prices after introducing an instance.

Cost of $1.85 is for “raw bandwidth” that someone drops and your front door — you have to carry that into the servers – in and out. Provide redundancy in the network — in the building in your cloud on top of it.

You have to pay people to manage these switches and routers. I don’t see the margins much different than your pizza stores or McDonald’s.

I think you’re making the mistake of Amazon == all cloud companies.

A bizarre form of cloudbursting would make sense here, related to what content providers have been doing with CDNs for years. Content providers host their own pages but refer the high capacity ones to CDNs. If I was launching a new bandwidth intensive app today, I’d rely on the cloud for my user subscription and account admin features as much as I could in order to have quick scale and usage-based pricing, but I’d put the commodity storage intensive stuff in my own well-peered data center or on a cheaper service. Many apps can run partly in the cloud if the economics justify that kind of architecture.

@Raindeer – you’re correct about peering. A company can save a significant amount of money peering. But like I and others have said above, that’s only 1 aspect of the cost of delivering bandwidth to servers or data. Bandwidth is an ultra competitive market and the big providers pay all the way down to $0 for bandwidth, but they still need to charge money because it does in fact cost them to manage it.