Southern Cross cable increases capacity, cut prices

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#570049 17-Jan-2012 17:15

Behodar: Stuff says that the new price is 6 cents per GB, but that's not correct, is it? SCC charges for bandwidth rather than per GB, right? 6 cents per Gb/s doesn't sound right to me either though...

Yeah, ISPs buy Mbit/s.. Last time I saw the going rate, it was ~$100-150 per mbit/s, depending on how much you buy, thought that might be out of date by now, someone feel free to correct me. :)

sbiddle

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#570050 17-Jan-2012 17:15

Behodar: Stuff says that the new price is 6 cents per GB, but that's not correct, is it? SCC charges for bandwidth rather than per GB, right? 6 cents per Gb/s doesn't sound right to me either though...

Nobody really bills per GB, ISP's and upstream providers typically buy and sell bandwidth in Mbps (or Gbps). It's then up to ISP's to translate this to GB caps.

The problem is the media have made a big deal out of something that understand very little about. SX's transit costs are merely that, the cost to carry data over the SX cable. Capacity on the SX cable is pointless without transit at either end to connect to networks both in NZ, and transit in the US to connect to the rest of the world. SX's pricing doesn't include either.

Today's annuncement is a bit like saying the price of glass has dropped, therefore beer should be cheaper!

kyhwana2

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#570052 17-Jan-2012 17:19

I'm not sure how much KAREN is paying per Mbit for their international bandwidth, but here's what KRIS (KAREN research internet service, avaliable to schools, etc that are on KAREN) costs, per Mbit.

Mbit purchased / Cost per Mbit.
less than 10Mb/s $74.00
10-50Mb/s $64.00
51-100Mb/s $59.00
more than 101Mb/s $49.00

codyc1515

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#570078 17-Jan-2012 18:17

Capacity increases, cuts prices?
I'd expect to see those written the other way around..

Talkiet

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#570080 17-Jan-2012 18:19

codyc1515: Capacity increases, cuts prices?
I'd expect to see those written the other way around..

I know it's a throwaway comment, but consider for a moment that it's what Southern Cross have done for the entire life of the cable... They have consistently cut costs and increased capacity.

I fail to understand why anyone would expect anything but what they've done.

(Disclaimer - I have nothing to do with SXC planning, pricing or diving)

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

sbiddle

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#570092 17-Jan-2012 19:13

codyc1515: Capacity increases, cuts prices?
I'd expect to see those written the other way around..

Why?

If you increase capacity you clearly need to sell that extra capacity. How do you do that? Discount the price - convincing ISP's to buy more capacity.

It's been the standard submarine cable business model, and SX's prices have typically dropped every year.
The same model also exists for ISP's - an ISP buys extra of this cheaper capacity and what do they do? Increase caps, and reduce the costs for higher use users.

Skillie

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#570236 18-Jan-2012 07:23

IN NZ HERALD:

"But despite a sharp drop in wholesale prices, commentators say it could be a long time before these cuts flow through to consumers.

InternetNZ chief executive Vikram Kumar said the lower wholesale rates apply only to new contracts and consumers will need to wait until internet companies re-sign with Southern Cross before prices change.

"It is absolutely not going to happen in the short term," Kumar said.

Telecommunications Users Association chief executive Paul Brislen agreed the cuts would take a while to reach the retail market.

"It'll increase data caps eventually, but because the ISPs are buying capacity on a 10-yearly cycle - the contracts run for quite some time - the odds are you won't mostly see much of anything in the short-term at all.""

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Beccara

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#570265 18-Jan-2012 09:33

I find that comment a bit odd, We've always seen our prices effectively drop only weeks after SxC price drops. If the ISP is expecting it's bill to drop then it might be the case but if the ISP maintains the $$$ spend they simply get a nice bump in capacity

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blackjack17

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#570291 18-Jan-2012 10:22

Skillie: IN NZ HERALD:

"It'll increase data caps eventually, but because the ISPs are buying capacity on a 10-yearly cycle - the contracts run for quite some time - the odds are you won't mostly see much of anything in the short-term at all.""

Do they really buy in 10 year cycles?, that seems a long time in tech years.

10 years ago most people still had dial up (if they had internet at all)

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PaulBrislen

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#570310 18-Jan-2012 11:13

Yeah, I didn't mean it literally - probably should have said multi year contracts.

this media thing is tricky.

P

Ragnor

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#570478 18-Jan-2012 16:31

Since 2008/2009 Southern Cross has sold capacity on a monthly lease basis in addition to the longer contract terms, obviously this is more expensive on a per Mbit basis than 10 year contracts

However most ISP's in NZ are far too small to buy direct in the capacities that SXC sells. Also SXC only sells raw capacity and doesn't include interconnection/peering at either end of the cable(s).

Most ISP's buy from resellers.. eg: Pacnet, Vocus, Global Gateway (Telecom), Odyssey (Kordia/Orcon) and Reach (Telstra AU) who include interconnection/peering etc.

Also ISP's have far more costs than just international transit... you've got: wholesale cost of using the line/adsl service to Chorus, backhaul, colocation of equipment, general equipment, domestic transit, staff, office costs, marketing etc etc etc.

jonherries

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#570484 18-Jan-2012 16:41

Presumably, the ISPs hedge their purchasing as this price and capacity change is predictable.

Interesting to me that the average change over the past 10 years the price has gone down by 21% and this year it is 44%.

The thing to keep in mind is that 21% off $100 is a $21 discount, 44% off $10 is a reduction of $4.40...

So depending on where we are in the cost equation and how much the cost of international bandwidth <edit: factors in a retail bill> will determine the benefits to the consumer...

BTW That thread about 3 year "Bait and Switch" is going to be bumped to a 10 year bait and switch! :P

Jon

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#570720 19-Jan-2012 10:51

I highly doubt you'll see any major pricing changes for the end user and when they do they will be minor. As Ragnor said INT is only one piece of the price puzzle.

What I think will happen is people may notice better INT speeds as ISP's get their INT bumped up without a price change, Even if we say that INT reseller's only drop their prices to ISP's by 20% when your buying say 1gbit that's a 200mbit increase for nothing which should help

blackjack17

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#570774 19-Jan-2012 12:40

Speed hasn't been a problem for me for a while. All it means is that I reach my cap that much quicker

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insane

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#571065 20-Jan-2012 00:40

jonherries: Interesting to me that the average change over the past 10 years the price has gone down by 21% and this year it is 44%.

Have to remember they are part way through an upgrade from 10gbps per wavelength to 40gbps per wavelength, meaning that when complete they will have a 4x increase in capacity, with a further increase to 100gbps per wave length by the end of next year, so their capacity increase is far from linear.

As mentioned above by others, the cost of international transit is by no means the largest component in delivering DSL, and hasn't been for years now.
Port costs however are, and are as much as $45 for a naked DSL port, and that's before the ISP does anything with it. Strangely non-naked port costs are less than half that...

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