imagine there are 1000 houses with 40Mb broadband. Does this mean that I would need a 40Gb/s connection?
or would I just have something like a 2Gb/s connection and use a device like a Netequalizer to rate limit everyone?
That's one way to do it. Strategies like this are one of the things that will make or break a provider. You absolutely must do two things:
- Keep customers from leaving, because customer provisioning costs are high
- Control your overhead, that includes (but not limited to) your transit fees (such as the aforementioned 2Gpbs connection)
In case it isn't obvious, those two goals are opposed to each other. In a previous life, I worked with a provider that routinely dropped many VoIP calls every Friday evening; this went on for months simply because they were too cheap to buy bigger circuits.
I am looking into the possibility of setting up a local ISP in the UK for my town.
Allow me to try to save you some money. The internet provider business is extremely low-margin, because it is absurdly expensive to operate. Lots of people who aren't in this business have thought "I think I'll open my own ISP", as if this is like operating a fast-food restaurant (conjure mental images of serving YouTube videos on a bun).
It's not like operating a restaurant.
Think about your costs:
- Trench cabling, or lease the transport to your customers premises (both options are very expensive)
- Backbone circuits and transit
- Infrastructure costs, like routers, switches and firewalls; these become obsolete, at most every five years. This means you're in a non-stop planning effort for "the next upgrade". Imagine what it's like to constantly renovate your house, that's not unlike what happens in a decent-sided provider.
- Build or acquire your own billing system
- Build or acquire your own customer provisioning system
- Legal challenges: DCMA takedowns, lawful intercept, etc...
- Hedge against regulatory risks, such as net-neutrality wrangling in the US
- Costs of STEM labor; sadly there already aren't enough of those laborers in the world
- All the other headaches of operating your own business.
If you try to play this game, you'll need to battle all the other established players. They have already figured out ways of handling the aforementioned challenges. You need to be better than them.
The truth is unpleasant, but it needs to be said. If you aren't sure how much transit bandwidth to buy, you're not showing a lot of promise for competing in this business. You need to find people sharper than this to operate and engineer things, or be prepared to pay for the school of hard-knocks. That's an expensive education in the internet provider business.