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.

@ Scott – I am very curious to see why you think that this market is mature – the operational quandries and confusion blogged about near daily seems to indicate otherwise – no one argues that “cloud” is “hip”, but is it really mature?

Lastly – the entire concept, imho, of the cloud revolves around a highly interconencted set of datacenters that are, from get-go, managed entirely as if the datacenter was a part of the computing platform, thereby allowing our IT best practices of centralized management to take root, providing the abiltiy to script & automate heretofore run-book processes that are manual (like technician going an writing down CRAC/UPS stats versus seeing on a dashboard) and allowing algorithms to come into play that shift data in and out of datacenters as say: a) seasonal electrical prices fluctuate, or b) impending weather looms (think Miami hurricane season), or c) you need to get your computing edge closer to the customer for latency requirements…all of which is possible, yet not in evidence in today’s offerings (hence, the lack of maturity). Clouds are the utility computing model come to reality (as Nic Carr talks about), but are still in the infancy stage of deployment and development – we also, which is something I talk about A LOT, are completely avoiding the sales/marketing aspect of this – the highly consultative sale that must be enabled is a part of the vendors “earning the trust” of the clients – outsourcing your companies sacred data is not to be taken lightly, it must be earned thru consistently good services that are always evolving for the best (think Myspace having lost the social wars here) to remain in the leadership position