Ever looked at a host and wondered how they could possibly offer hundreds of gigabytes of bandwidth or even terabytes of bandwidth for less than $10 a month? It’s no secret that companies like Dreamhost offer more than you could possibly imagine using up. But is it on the level?
Economies of scale
Most people know what Economies of scale means — it’s how WalMart and Costco have dominated the American landscape. The basics of it is that the more you buy, the cheaper per unit things cost. This applies to bandwidth too. Bigger hosting companies host thousands of customers across hundreds of servers. They’re paying big bucks for a ton of bandwidth already, so it’s cheaper per GB for them to purchase.
In fact, it goes one step beyond that. Bigger hosting companies can buy whole connections to the internet. Meaning they’re no longer limited by the amount they transfer, but rather the rate at which they transfer.
Another big reason this works is that extremely few people use up their entire bandwidth allocation. That means that there’s a little bit left over that other people can use. A lot of people call this overselling — but it’s simply smart business. The chance that every single one of thousands of customers decide to one day use their entire bandwidth allocation on the same month is astronomically small. Every industry on this planet oversells in some aspect. Houses are built so that the roof won’t collapse under the biggest snow-storm in 100-years or* the biggest earthquake in 50 years. *Not both at the same time
In my opinion, overselling is good. It lets hosts sell the reserve capacity of their servers, and lower the price for everyone. There is, however, an extent to overselling at which it becomes bad. None of the hosts listed on this site go that far.
You really don’t need that much bandwidth
I would say over 95% of people purchasing hosting don’t need much more than a few GB of transfer a month. The truth is that unless you are doing something illegal (such as offering programs or copyrighted music for download), most websites just don’t take up that much bandwidth. The limiting factor is almost always going to be CPU/Memory usage.
Don’t be afraid of high transfer rates, just sit back and enjoy the freedom! Happy searching!