Hosting Prices in Limbo?

First, it is important to explain what effects hosting prices. With most hosting providers, especially adult hosting providers, they are usually buying their bandwidth from a high-end fiber carrier. These carriers provide large amounts of bandwidth at low prices. The hosting provider purchases the bandwidth and then attaches their servers to that bandwidth. When a Webmaster opens an account with a hosting provider, they are often not actually buying bandwidth from that provider. They are buying a hosting service that uses another carrier’s bandwidth. The hosting provider will mark up the cost they are paying to the carrier, add some costs for labor and equipment, and then you have your hosting rate.

Since the labor and equipment costs have not changed much over the last few years, it is the carrier’s bandwidth that affects what you pay for hosting. This is exactly the reason that hosting rates have dropped - bandwidth rates have dropped.

The main carriers will always have slightly higher than average bandwidth costs. These carriers have been around for a long time and charge more because of how well laid their network is. These include Colt Telecom, KPNQwest and WorldCom. Anytime you can find a hosting provider that uses these, you will not get the lowest rates available, though you will be getting good service.

About three years ago, a new carrier exploded onto the scene with rates in most cases half as much as other carriers. This company, Level 3 Communications (with offices across Europe), caused a chain reaction that first allowed per-gig rates to reach $2/gig. However, they were not as solid as the major carriers and experienced some major growing pains. Now, many Webmasters entrust their sites to Level 3.

Level 3 ’s rates have not lowered much, but other providers have since matched their rates, and now every hosting company is at least able to charge $2/gig.
Not too long ago, another pioneer, Cogent Communications (based in Washington, D.C.) started selling bandwidth at incredibly low rates - and hosting providers began to introduce the 50 cents per gig rates. As with Level 3, Cogent has gradually won much business from high bandwidth sites in North America.
Other carriers have begun to lower their rates in an attempt to compete with these new low rates. One wouldn’t expect all carriers to be as low as Cogent for at least another year, though many will match their rates very soon.

In two to three years, it’s conceivable that another new carrier will show up with rates half as low as Cogent and this may happen again in about six or seven. In three years, it’s expected that most hosting providers will not be exceeding more than a buck per gig.

So, when these new providers show up, does that mean you should drop your current provider and run to the new one? Well, that is a matter of preference on your part. It is important to keep in mind that when new carriers open up, it is often brand new hosting providers that take advantage of their rates and plan to make their business by offering the lowest rates in the adult market. So, in many cases, you are going to end up trusting your website to the new guys on the block, instead of an experienced provider.

If you are not satisfied with your current provider, by all means, jump ship and go with one of the new low rate providers. First establish that the provider’s track record is good by speaking to existing customers. If your current provider seems reluctant to ever offer you the lower rates, it may be a good time to test the waters.

Play it smart. If you are determined to always have the lowest rates on the market, it means you are going to be jumping from provider to provider every three months or so.