What if Bandwidth Were Free?

The "original insight" for Microsoft was the question: "What if computing computing were free?" It might have seemed a ludicrous question. Young Bill Gates reportedly asked himself what his business would look like if hardware were free, an astounding assumption at the time. 

“The mainframe we played tic-tac-toe on in 1968, like most computers of that time, was a tempermental monster that lived in a climate-controlled cocoon,” Gates wrote in his book The Road Ahead. “When i was in high school, it cost about $40 an hour to access a time-shared computer using a teletype.”

Owning a computer was an impossibility, as they cost several millions of dollars. In 1970, a computer cost perhaps $4.6 million, as there only were mainframes. Importantly, when Micro-Soft was founded, Gates concluded that the cost of computers would drop so much that the cost of the hardware was not a barrier to using them. 

In 2004, Gates argued that “10 years out, in terms of actual hardware costs you can almost think of hardware as being free. I’m not saying it will be absolutely free, but in terms of the power of the servers, the power of the network will not be a limiting factor.”

You might argue that is a position Gates adopted recently. Others would argue that has been foundational in his thinking since Micro-soft was a tiny company based in Albuquerque, New Mexico in 1975. But prices did, in fact, tumble. 

In 1972, an HP personal computer cost more than $500,000. In inflation-adjusted terms, an Apple II computer of 1977 would have cost $5,174, for example. 

Microsoft's newer "insight question" was: "What if digital communication were free?" It's the same scenario, only this time it applies to the capacity to move data--audio and video as well as text--from one point to another. The technical term is bandwidth, and many other companies share the "insight." Says Intel CEO Andy Grove, for example, "If you think PC prices have plummeted, wait till you see what happens to bandwidth. 

As much as telecom executives might rue the observation, bandwidth is approaching the point where its use does not impede creation and use of applications, no matter how bandwidth-intensive they might be.