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The cost per GB of bandwidth for most cloud providers such as AWS is about 10c per GB. If that is the case then assuming each user uses on average, 300GB per month, VPN providers will need to pay about $30 per month per user.

Obviously VPN services are much cheaper than $30 per month. If that is the case, how do they stay afloat?

Is there some way to host without paying much on bandwidth?

I heard of IP Transit, etc. But does anyone actually have the details on how to save money on bandwidth?

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  • Why would a VPN provider be paying the AWS rate for bandwidth? Aug 8 '21 at 8:25
  • Exactly. I would like to know what are they using for bandwidth
    – lbj99
    Aug 8 '21 at 8:25
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If your needs are large enough then that means you should probably get your own AS (like an ISP) and sign up with a tier 1 provider for the peering arrangements, and you buy/rent servers preferably in multiple locations. There are more options than AWS. Regardless of you use you can negotiate discounts based on volume.

To give you an idea, I run my own VPN service using a VPS that costs $5/month. My monthly traffic is more or less your estimate of 300 Gb/month. My provider does not charge for extra unless consumption really goes through the roof.

This an end-user rate for just one user (me) and it's already extremely cheap. In theory I could add a few subscribers on the same machine and rent my VPN service, and quality of service should remain good. If I scale up this arrangement, the cost per user/month becomes negligible.

Just shop around, the market is very competitive.

Providers such as AWS, Cloudflare offer extra services like DDOS protection so you also pay for that assurance. It's built in the price.

Hosting is cheap, but monitoring and upholding quality of service increases costs. I don't mind occasional downtime since I am my own customer. If I had paying customers obviously I would need to invest in resiliency.

That said, many hosting companies are resellers, may do not own any infrastructure at all but rent everything to provide services to end users.

VPN providers are no different.

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  • I wonder why AWS is so expensive - is it their own internal costs or are they getting charged ridiculous fees by ISPs? Maybe the server stuff is a loss leader and bandwidth is where they make their money...
    – user253751
    Aug 31 '21 at 14:45

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