Who's telling the broadband cap truth?

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#212294 4-May-2009 22:46

Wasn't Telecom mandated by the Labour government to increase sync speed and improve our OECD broadband ranking by 2012, hence Telecom brought the schedule forward?

"The minister (David Cunliffe) has also promised that by 2012, 80 per cent of internet users will experience connection speeds of 20Mbps or higher, while 90 per cent of the country will have 10Mbps." - August 2008

The notion that Telecom should not invest in infrastructure improvements like cabinetisation, ADSL2+, VDSL etc.. in effect purposely slow down progression more than they do already (to get a ROI) soley to benefit competitors who aren't willing to invest in building their own exchanges, cabinets and backhaul fibre seems a bit ludicrous.

There is an incredibly fine balance between too much and too little regulation at play imo.

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#212331 5-May-2009 00:31

People forget that ISPs also factor in the network equipment costs/ systems costs and support costs into the total price they charge for their broadband package. Some ISPs opt to use a port price + data price component, others simply offer a set price for a set speed + data cap.

The going price for data over Asianetcom last time I checked was around the $400/mbps mark, with as much as $600/mbps over GGI. Of course it does depend on how much you're buying off any one provider as there are discounts for bulk buying. I'm quite interested in the $268/mbps that was mentioned in the article when purchased in 155mbps quantities... seems too low unless that too is in US dollars.

As mentioned above ISPs buy data in Mbps, not GBs. Unfortunately users don't download at a constant rate throughout the day so there are times in the day when bandwidth which has been bought is not used, and other times when the bandwidth usage is fully utilised or close to fully utilised meaning you have to purchase far more bandwidth than the average utilisation.

You can rest assured that NZ ISPs are not making much $$ off the average DSL user so if prices are to come down in NZ its going to have to be the port costs or the int bandwidth costs that they are subject to.

I guess working for an ISP and having seen the complex equations / models used to calculate pricing has given me a good idea of all the components which go into determining the price the end user pays.

When you again on-sell ISP services it gets even more trickier as you also have to make sure that you still allow those businesses to make profit for themselves by not undercutting them.

Regs

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#212337 5-May-2009 00:46

jpollock:
Ragnor:
I guess they can gripe about Chorus being too good at deploying cabinets / ahead of schedule but that's very trite.

On the early roll-out of cabinets, they actually do have a valid gripe.

If you've spent 200k on a DSLAM that supports 720 ports, you can't move that into the cabinet (too big!). You need to spend another 400k+ (smaller DSLAMS cost more per port) and roll them out all over the area. And _then_ you're stuck with the 200k DSLAM that you can't do anything with.

If the original schedule had it happening 3 years after you got your equipment in, but it happened in 1, that's 2 years of depreciation you have to swallow, and 400k you have to find 2 years earlier.

Yeah, I'd be unimpressed too.

It's good for TNZ's retail customers, bad for their wholesale customers. Part of the problem with the soft-division that the regulator opted for.

so... if a fiber-to-the-home network gets rolled out in the next two years, will there subsequently be complaints from these ISPs rolling out sub-loop-capable DSLAMs in the near future?

The interested parties knew about cabinetisation - it was on the cards long before the LLU was completed. Perhaps they just gambled on the fact that it would take longer to deploy? Some areas needed cabinteisation to happen right away though - example is Pt Chev - as they were never able to be serviced by the existing exchange.

Perhaps the smart ISP just waits for the wholesale sub-loop product to become available and leaves the infrastructure to the wholesalers.

As for the cabinetisation rollout schedule - Telecom could quite easily have been still waiting on RMA approvals - it took some time for them to come through and i'm surprised it didnt take longer.

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Screeb

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#212350 5-May-2009 04:19

Ragnor:
re: Screeb

What if no one else is willing to stump up the extremely large invested and take the no insignificant risk of building a competing cable to connect to NZ? Doesn't that effectively make it a natural monopoly?

Yes, of course it's a natural monopoly. How does that have any bearing on what I said? But it's not just a matter of no one being "willing to stump up" the cash (and remember, there's far less ROI possibility for a second cable, compared with SCC being the first). The reason we don't have other cables when other countries do is that laying an undersea cable has a large fixed cost, independant of the number of potential customers (ie not good for us since we're a small country). That's why only now do we have the chance of getting a second one, by piggybacking off PPC-1.

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#212357 5-May-2009 07:42

Regs:
so... if a fiber-to-the-home network gets rolled out in the next two years, will there subsequently be complaints from these ISPs rolling out sub-loop-capable DSLAMs in the near future?

The interested parties knew about cabinetisation - it was on the cards long before the LLU was completed. Perhaps they just gambled on the fact that it would take longer to deploy? Some areas needed cabinteisation to happen right away though - example is Pt Chev - as they were never able to be serviced by the existing exchange.

Perhaps the smart ISP just waits for the wholesale sub-loop product to become available and leaves the infrastructure to the wholesalers.

As for the cabinetisation rollout schedule - Telecom could quite easily have been still waiting on RMA approvals - it took some time for them to come through and i'm surprised it didnt take longer.

If a firm's business model has knife thin margins because of how pricing is set (see earlier comment), any additional cost is going to cause problems. If equipment has to be replaced before it has earned its purchase price, that's a loss that you didn't plan for. In today's market where businesses are having hard time finding large financing, that's a _huge_ problem. Imagine the situation. You've just spent NZ$2m on new DSLAMS (7U large port units). They are going to take the full 3 years to pay back their purchase price, due to margins and price competition in the market. Now, you're told that instead of having to purchase new equipment in 3-4 years when the local area moves to cabinets, it's happening in 6 months. So, that $2m you've just spent (including installation) is now worthless unless you can find somewhere else to put it. If the length of time between the CO being opened up for LLU to cabinetization becomes too low, there's no point in installing it anyways. Essentially, that's money's wasted. Your shareholders are yelling at the Chairman, the CFO's going "WTF?!?" and everyone's looking at the CTO who goes, "But, but, but, they said it would be _years_!"

I've found that in most businesses, being early can be just as bad as being late.

Now, that isn't to say that this shouldn't have happened, or that it shouldn't have happened on the schedule that it is happening on. I was just pointing out that there the ISP's complaint may be valid.

As for cabinetized isps complaining about FTTH. I don't think so, unless Telecom does something nasty like severing the twisted pair connections to the house (I believe Verizon has been doing that).

Wholesale broadband pricing doesn't work if the incumbent is the one offering the wholesale product. Just look at how the prices are set to see why. You can also look at the Canadian experience, where there's a big fight over shaped traffic in the wholesale products. It might work with a proper split, but it hasn't worked here or in Canada.

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#212362 5-May-2009 07:57

Hey, did anyone else notice that the math in the Herald story was complete trash? There's no way to get that price for the movie from the price for the link. As always, there's no way to comment on the story, and letters to the editor links are impossible to find.

Terrible article. I hate it when they get the math wrong.

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rickcrawley

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#212484 5-May-2009 13:11

I think we should all email the southern cross cable network and ask them if they would decrease the price they charge isps for data by at least half which would mean doubling of data caps on all broadband plans:

http://www.southerncrosscables.com

We could explain to them that american isps and uk isps have unlimited or 100gb+ caps for less than $100 new zealand dollars per month.

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#212511 5-May-2009 14:01

rickcrawley:

We could explain to them that american isps and uk isps have unlimited or 100gb+ caps for less than $100 new zealand dollars per month.

Yes and they can explain to people like yourself that in America most of the internet traffic originates from America, in New Zealand most of the internet traffic still originates from America. It cost money to send data to New Zealand, no conspiracy theory here.

nzbnw

Ragnor

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#212514 5-May-2009 14:10

rickcrawley: I think we should all email the southern cross cable network and ask them if they would decrease the price they charge isps for data by at least half which would mean doubling of data caps on all broadband plans:

http://www.southerncrosscables.com

We could explain to them that american isps and uk isps have unlimited or 100gb+ caps for less than $100 new zealand dollars per month.

They are a business not a charity. How would you like us to send emails to your boss telling him to pay you only half of your salary this year.

Ragnor

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#212516 5-May-2009 14:13

Screeb:

Yes, of course it's a natural monopoly. How does that have any bearing on what I said? But it's not just a matter of no one being "willing to stump up" the cash (and remember, there's far less ROI possibility for a second cable, compared with SCC being the first). The reason we don't have other cables when other countries do is that laying an undersea cable has a large fixed cost, independant of the number of potential customers (ie not good for us since we're a small country). That's why only now do we have the chance of getting a second one, by piggybacking off PPC-1.

It has a bearing because even if the Kordia leg of PPC is built there's no gaurantee it will reduce prices, they will have to price transit at a level which gives a good ROI to cover the high fixed cost of building it.

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#212518 5-May-2009 14:13

Ragnor:

They are a business not a charity. How would you like us to send emails to your boss telling him to pay you only half of your salary this year.

A B2B business at that, not a B2C, so any complaints about pricing should be put to your ISP.

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#212525 5-May-2009 14:33

insane:

The going price for data over Asianetcom last time I checked was around the $400/mbps mark, with as much as $600/mbps over GGI. Of course it does depend on how much you're buying off any one provider as there are discounts for bulk buying. I'm quite interested in the $268/mbps that was mentioned in the article when purchased in 155mbps quantities... seems too low unless that too is in US dollars.

Pretty sure 2.4 Gbps direct from SX works out in the $150-250 NZD per Mbps range, probably even cheaper at 5 Gbps or 10 Gbps.

However doesn't sound practical for any ISP other than TelstraClear or Telecom to be buying that much transit... both are likely to already have deals via other parts of their company (Telecom Global Gateway, Telstra).

Screeb

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#212596 5-May-2009 18:10

nzbnw:

Yes and they can explain to people like yourself that in America most of the internet traffic originates from America, in New Zealand most of the internet traffic still originates from America. It cost money to send data to New Zealand, no conspiracy theory here.

nzbnw

No one's saying there's a "conspiracy". It's called a monopoly. Super normal profits.

Ragnor:

It has a bearing because even if the Kordia leg of PPC is built there's no gaurantee it will reduce prices, they will have to price transit at a level which gives a good ROI to cover the high fixed cost of building it

Of course it's not guaranteed, but it's highly likely that they will be able to offer cheaper prices than SCC. Monopoly means monopolistic prices.

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#212604 5-May-2009 18:22

Screeb:

No one's saying there's a "conspiracy". It's called a monopoly. Super normal profits.

What I am saying is you can not compare NZ and America in terms of data costs.

nzbnw

old3eyes

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#212624 5-May-2009 19:09

rickcrawley: I think we should all email the southern cross cable network and ask them if they would decrease the price they charge isps for data by at least half which would mean doubling of data caps on all broadband plans:

http://www.southerncrosscables.com

We could explain to them that american isps and uk isps have unlimited or 100gb+ caps for less than $100 new zealand dollars per month.

I was at a function the other week where there were some hight Telecom People and we were discussing the Southern Cross cable and it's capacity. The Telecom manager said that there was plenty of spare capacity on it. When asked why they didn't drop the price so that more would be used he replied "Why should we . We don't have any competition" Guess that sums it up..

Regards,

Old3eyes

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