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The alternative way of thinking about it is that buying at spot rates includes an embedded option to not use the capacity. This real option has some value, so customers are willing to pay higher rates in the spot market rather than through contracts. There's necessarily some level of contract discount - otherwise, everyone would pay spot rates for the free optionality.



Which, at the end of the day, was the original value prop of EC2. Capacity planning is a challenging problem, no matter the industry.


That's a great way of putting it.




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