Keep in mind that with cloud providers you're also paying for the SDN that makes dynamic provisioning of VMs and logical network segmentation possible. Scalable SDN is much harder / more expensive than traditional networking.
True, and it's still probably overpriced... but a lot of the SDN expense is in the stateful routing between networks (e.g., traffic going to/from the internet).
I'm not an expert, but it's possible... from what I understand amazon does SDN on CPUs in Dom0, Microsoft uses FPGAs, and Google has burnt their own ASICs... those are all expensive options. Much more expensive than generic networking gear. Possibly 4-5x, but idunno...
I believe Amazon uses commodity NICs + iptables in Dom0 (based on rumors). I have no idea what a custom ASIC would cost, but I think the Jupiter networking gear / Titan NIC that Google built are pretty advanced components that would cost more than commodity stuff.
In any case, the hardware components are fixed costs. What's not fixed is the cost of applying routing and segmentation rules for each packet. There are scarce resources involved here: the hardware has limited memory and limited cycles. You're paying for the use of those scarce resources (e.g., having a memory resident stateful firewall rule for a TCP session). Charging for bandwidth isn't perfect, but it probably correlates pretty closely with the underlying resources and is a much more intuitive unit-of-value for customers.
According to me... Are you arguing that it's not? It stands to reason that dynamic network architectures (SDNs) would be harder and more expensive to design and build than static architectures... it's the difference between managing shared mutable state and managing shared immutable state. On the hardware side, a simple commodity hub or switch is cheaper than a CPU, an FPGA, or burning your own ASIC to do fast SDN.
