I think there's two reasons: one, it makes them gobs of money. Two, it discourages customers from building architectures which integrate non-AWS services, because you have to pay the data transfer tax. This locks everyone in.
And yes, AWS' rates are highway robbery. If you assume $1500/mo for a 10 Gbps port from a transit provider, you're looking at $0.0005/GB with a saturated link. At a 25% utilization factor, still only $0.002/GB. AWS is almost 50 times that. And I guarantee AWS gets a far better rate for transit than list price, so their profit margin must be through the roof.
And yes, AWS' rates are highway robbery. If you assume $1500/mo for a 10 Gbps port from a transit provider, you're looking at $0.0005/GB with a saturated link. At a 25% utilization factor, still only $0.002/GB. AWS is almost 50 times that. And I guarantee AWS gets a far better rate for transit than list price, so their profit margin must be through the roof.