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CenturyLink slashes prices to guarantee its megacloud future

Bets big to be among the ten megaclouds left standing

Internet Security Threat Report 2014

When your entire market is hellbent on destroying itself through an endless death march of price cuts, you're faced with a choice, either you hold on tight and keep cutting, or you get into another business.

Major co-location provider CenturyLink is opting for the former and to help it along is beginning to put the assets of its numerous recent cloud acquisitions Tier 3, AppFog, and Savvis, into play.

The company has followed Amazon, Microsoft, and Google in dramatically cutting the prices of its cloud services, with "a typical CenturyLink Cloud VM" now costing "at least 60 percent less" than before, according to one document seen by El Reg.

Along with this, the company has added in support options including that rarest of rare cloud support options, real live human beings ("Technical Account Managers") to scream at when things break. These are meant to help it grow its potentially lucrative stable of enterprise customers.

It has also put its globe-spanning private fiber lines into cloud service and in doing so cut network bandwidth prices down to $0.05 per gigabyte out per month.

These significant price cuts and service additions represent a gamble by the company that it is large enough and has enough technological capabilities that not only can it be one of the top ten global megaclouds, but it can steal business from incumbents like Amazon and Microsoft along the way without going broke.

This compares with other providers, like Rackspace or Joyent, which have sat out of the recent red-ink-orgy of price gouging.

CenturyLink reckons it won't have to sacrifice its profits at the alter of market dominance, though.

"We believe we have the scale to compete," CenturyLink's cloud senior vice president Andrew Higginbotham told El Reg. "Our advantage here is both our significant datacenter footprint - with 56 datacenters we are one of the largest datacenter providers globally - but also the fact that we own a global network."

"We have 240,000-route mile national fiber network and 280,000 route miles of international transport network along with an IP MPLS redundant global backbone. We are putting these assets to work in cloud."

Along with the price cuts and services, CenturyLink also gave some numbers that, it reckons, prove it is sane to compete with companies that routinely spend over a billion dollars on capital expenditures per quarter.

The company has over 1,000 enterprise customers, is the second largest data center colocation provider in the US after Equinix, has over 2 million square feet of IT space across its data centers and, according to benchmarks from Cloud Harmony, displays better performance than an equivalent AWS instance.

It also claims it is now "the same or is less expensive than every AWS M3 server type and EVERY [sic] equivalent AWS c3 (comptue optimized) server type for CPU+RAM."

Though cloud companies are, for now, making good money off of their equipment providing they maintain utilization, the trend for pricing is down, down and further down.

"We're doing fine, even with price drops, we're going to keep on making sure we're making money with this," CenturyLink's cloud CTO Jared Wray told El Reg.

CenturyLink thinks it will snare some more enterprises before its margins collapse, and then the money will go up, up and up. IBM is hoping for the same thing with its SoftLayer cloud, but it's still unclear how close a massive enterprise market is. ®

Internet Security Threat Report 2014

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