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Topic # 103153 31-May-2012 13:25 Send private message

Just received a link to an interesting study called "Understanding the Trans-Tasman Broadband Value Gap: ISP costs in Australia and New Zealand" (free PDF download):


Study finds Australian ISP margins smaller than in New Zealand

SYDNEY, 1 June 2012: The gap between Australian and New Zealand broadband allowances is more likely to be the result of competitive pressure than the underlying costs of service provision, according to new research by Sydney-based telecommunications analyst firm Market Clarity.

In spite of a widespread perception that New Zealand ISPs pay too much for services such as domestic and international IP Transit, the study, Understanding the Trans-Tasman Broadband Value Gap: ISP Costs in Australia and New Zealand, suggests that these costs are comparable between Australia and New Zealand — and may even be lower for Kiwi carriers.

The study, based on interviews with retail ISPs on both sides of the Tasman, also finds that Australian ISPs devote more ARPU to wholesale service costs (such as ADSL access services, domestic backhaul, and IP Transit) than their counterparts in New Zealand.

“The results are surprising,” said Market Clarity CEO Shara Evans. “There is a widespread perception, particularly in New Zealand, that the costs of international services drive the difference between the allowances offered Australian and New Zealand broadband customers.

“However, our research suggests that other factors are more significant. These might include the different domestic regulatory regimes in the two countries, and the competitive pressure brought about by Australia’s much larger number of retail ISPs.”

After all network costs (network access, domestic backhaul and IP Transit) are taken into account, she said, the research shows that Australian retail broadband ISPs retain a median profit margin of 26.3% of ARPU, while New Zealand ISPs have a median margin of 38.8% of ARPU.

Overall broadband profit margins were much more difficult to determine, as many ISPs only tracked network costs on a per product basis. Other expenses such as customer acquisition, customer support, internal IT, business administration, depreciation, interest and tax, may be tracked on a company-wide basis and are not allocated against individual products.

 “Our interviews with ISPs in Australia and New Zealand also revealed different concerns about what might prevent business growth in the future,” Ms Evans said.

“In Australia, ISPs are concerned at aspects of the NBN pricing model. In particular, they are worried that the NBN’s CVC pricing could emerge as a future constraint to growth in customer allowances. ISPs are also worried about the large number of NBN POIs (Points of Interconnect).

“However, New Zealand ISPs were more likely to nominate lack of consumer access to content as holding back growth.

“Although some New Zealand respondents to our study said their broadband growth is constrained by factors like IP Transit costs, this was not corroborated by our comparison of their cost base relative to Australian providers,” Ms Evans said.





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  Reply # 635930 5-Jun-2012 11:14 Send private message

Interesting.

So it is cheaper for New Zealand ISPs to purchase IP transit than in Australia yet we still pay more than Australian consumers.

I knew the constant harping on about costs being so much higher in New Zealand wasn't correct :)

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  Reply # 636136 5-Jun-2012 15:25 Send private message

Interesting to see that the usual ISP spokepersons are very quiet around this subject. One might assume guilt through silence.

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  Reply # 636261 5-Jun-2012 19:25 Send private message

djrm: Interesting to see that the usual ISP spokepersons are very quiet around this subject. One might assume guilt through silence.


Wonder where the profits go?

Wonder how many New Zealanders own any investment in an ISP?

Wonder how many New Zealanders want to work in the space?








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  Reply # 636264 5-Jun-2012 19:30 Send private message

And I just thought it was because we have the same population as Sydney spread over a squillion times the area....




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  Reply # 636269 5-Jun-2012 19:36 Send private message

hairy1: And I just thought it was because we have the same population as Sydney spread over a squillion times the area....


Na, they're not saying that, and .au only has slightly higher population density than we do.






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