Ever heard someone brag about how they purchased something on wholesale? By avoiding the retail price, they have benefited from purchasing a large amount of something that, when priced out by the individual item, comes out cheaper.
In the telecom industry, the same thing can be done. At a high level, purchasing wholesale internet allows telecom companies to sell the services back to businesses or individuals at locations they could not previously served.
If you’re interested in learning about the ins-and-outs of wholesale bandwidth and wholesale bandwidth providers, this blog post is for you. In it, we explain what wholesale bandwidth is as well as why telecom companies choose to purchase internet in this method.
What Is Wholesale Bandwidth Internet?
Wholesale bandwidth service is a bandwidth connection that provides high-speed internet or data service. Wholesale bandwidth internet is integral to the telecom industry. Without it, businesses and individuals cannot receive services.
Here’s how it works:
- Telecom companies purchase market access, bandwidth, functionality, and servicing on a wholesale basis to resell the services in a retail market.
- From there, these connections are sold to businesses and consumers.
The majority of wholesale purchases are made by telecommunication companies, cable companies, or, in some cases, government agencies, educational institutions, and media outlets.
Wholesale ISPs vs. Facility-Based ISPs
There are two types of internet service providers (ISPs): Wholesale ISP and Facility-based ISPs:
- Wholesale ISPs (aka Solution Providers) purchase the services of a facility-based ISP in bulk. From there, they resell the services to their customers with the services rebranded as their own.
- Facility-based ISPs (aka Carriers) maintain their own technology. They connect individuals and businesses with a direct connection from the physical location to the main internet pipeline.
There are benefits to both types of ISPs. Although some might think that facility-based ISPs are the best option, this is not true for most businesses and certainly not for individuals. Unlike wholesalers, facility-based ISPs are able to troubleshoot issues in a physical way because they are dealing with their own physical infrastructure. However, facility-based ISPs can be significantly more expensive compared to wholesale ISPs.
Why Do Telecommunication Companies Buy Wholesale?
The biggest reason telecommunications companies need to buy wholesale to become ISPs is that telecom companies are not national. Although several telecom companies have franchise areas, none of them provide capabilities on a national scale, which means most service providers have physical infrastructure in addition to reselling wholesale internet.
To help illustrate this point, let’s take a look at two examples:
1. Delivering Services Across Territories
A telecom company that provides service for Chicago has a local business client with an office in Tulsa. To provide services for that business client, the telecom company would need to purchase wholesale broadband access from a firm that owns the Tulsa area franchise.
By purchasing wholesale broadband, the telecom company is able to deliver services between the client’s offices, thereby securing the client’s internet connection and local area network (LAN).
2. Competition in the Same Market
In many cases, telecom companies are competing for business in the same market. To remain the most competitive, providers will purchase wholesale capacity because it’s cheaper, easier, and quicker to buy than to build more infrastructure, such as fiber optic, coaxial, and DSL lines.
Instead, ISPs can purchase the following to resell to their customers:
- Dedicated Internet Access (DIA): This carves out a specific amount of bandwidth for the purchaser to connect to. Although this can be done with cable, DSL, or wireless connections, it is most often done with fiber.
- Carrier ethernet: This solution provides a low-cost, easy-to-implement approach for purchasing broadband internet connections and securing local area networks.
- Tower backhaul: This can be accomplished by connecting microwave or cellular towers through existing fiber-optic cable or new cable between towers.
- Fiber-optic cable: Unlit fiber-optic cable is referred to as “dark fiber,” and it represents the excess capacity built into a fiber-optic network to avoid the expense of running additional cable. Purchasers of this option connect to the cable with their own technology and maintain operational control.
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