Why are there data caps in New Zealand?

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#827051 28-May-2013 14:14

Edwood:

Data caps allow people who consume less bandwidth to pay less money than those who consume more. Its a fair system - it would not be if Grandma Poppet had to pay for unlimited b/w for the 7 emails she gets each month whilst Salty pauses his 24x7 Steam downloads only so he can stream his nightly movie marathon.

(OK, in hindsight, my parking gge analogy doesn't really work all that well).

you are right that this is probaly one of the main reasons for having different sized data caps. it allows price discrimination.

Most people think of price discrimination as a bad thing, but it can be very good.
for one thing, it enables people who don't want to spend loads of money on broadband to still get access.

If there was only 1 plan, unlimited data with a landline (for easy comparison), the price would have to be somewherein the region of $85-90.
But with todays plans, you can getplans for $75, or even less if you think flip have a sustainable price structure at $50 (they don't, based on their submission for the comcom). those plans would simply not be possible without the people paying more subsidising the other people paying less.

ChillingSilence

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#827061 28-May-2013 14:21

In order to get some semi-decent speeds, and avoid the mass-oversubscriptions, I'd envisage the base cost would need to be a fair bit higher than that...

Jaxar

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#827084 28-May-2013 14:42

PAYG plans used to be the norm or at least buy X cap and pay for data afterwards which is basically the same thing. That type of plan is still there as an option for customers with most providers. The plan is not the norm however it is not like it isn't an option.
Bandwidth caps are there based on consumer demand for them OP has a really good question on why the demand is this way.

Of all the customers I've spoken to about their bandwidth confusion, issues or desire for more data. I am almost consistently turned down when I offer them a PAYG type option, often right after they have told me something like they would be willing to pay for such an option.

The main reason I've seen from speaking to customers is Cost control.
The caps act as a buffer giving price certainty. Lets use the petrol/car analogy. I can't count the number of times a kid under the age of 15 has used up an adults bandwidth without them realising it. We don't however get many adults complaining a kid under the age of 15 has used up or their petrol driving around. Adults have control and knowledge of their car they often don't of their internet accessing devices.

The above example is used because it is easily accessible and fits nicely in cynical little way with the car analogy. As this community knows there are more subtle things that the average public doesn't understand like the fact watching a youtube clip in HD vs 320 will use more data.

Please note: I have a professional bias towards Vodafone.

myfullflavour

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#827106 28-May-2013 15:12

universenz: Great discussion, but please stop comparing it to Cars.

There is a reason why the internet is commonly referred to as the "Information Super Highway".

In my opinion I think we've got it all backwards in NZ..

The network should be treated like toll roads and reverted to the days of 56k where you could pay for an unlimited data plan that was limited by speed (aka congestion). If you wanted faster speeds, you needed to upgrade to ISDN lines etc (aka pay to use the toll road).

By backwards I mean, unlimited 1mb/1mb for $50 should be standard for every NZ household.

You want super speeds and prioritized traffic? Pay a premium for a faster connection.. Afterall, chances are your need for faster speeds is probably because of your dependence (or dependents) on the connection is greater.

TL;DR - Internet should be unlimited data in every home, but limited by speed ie. 1mb/1mb. A premium should be charged to those who want faster speeds and no congestion.

I just wanted to publicly thumb up this particular post from universenz.

StarBlazer

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#827110 28-May-2013 15:18

I wouldn't mind even if the overage charge was proportionally the same as my plan charge.

Being very simplistic about it, my 40G plan costs 65.94 (as part of my service) which is roughly $1.65/G - however my overage charge is 2.94/G which is 80% more expensive - 40G at that price would cost 117.60!

Don't get me wrong, I'm content to pay for what I use, but I do think Vodafone should be fairer with the price and yes it's my choice to select that plan which is an extra $10 for 20G (0.50/G). Would it really kill their profits to charge me at the same rate per Gig as my plan is currently?

I know I'm slightly off topic but the point I'm making is we are never going to achieve a cap free general service while this kind of pricing is still being used.

Incidentally, yes I prefer to be charged than throttled back.

Procrastination eventually pays off.

Jaxar

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#827192 28-May-2013 17:00

StarBlazer: I wouldn't mind even if the overage charge was proportionally the same as my plan charge.

Being very simplistic about it, my 40G plan costs 65.94 (as part of my service) which is roughly $1.65/G - however my overage charge is 2.94/G which is 80% more expensive - 40G at that price would cost 117.60!

Don't get me wrong, I'm content to pay for what I use, but I do think Vodafone should be fairer with the price and yes it's my choice to select that plan which is an extra $10 for 20G (0.50/G). Would it really kill their profits to charge me at the same rate per Gig as my plan is currently?

I know I'm slightly off topic but the point I'm making is we are never going to achieve a cap free general service while this kind of pricing is still being used.

Incidentally, yes I prefer to be charged than throttled back.

I've always understood BB to be a low margin product sold bundled with phone to make money on toll calls. Would it kill the profit to give you and you only a deal like that. Nah I doubt it. Multiply that by all customers and well that's a pretty bit of change isn't it.

Please note: I have a professional bias towards Vodafone.

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StarBlazer

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#827214 28-May-2013 17:40

Jaxar:
StarBlazer: I wouldn't mind even if the overage charge was proportionally the same as my plan charge.

Being very simplistic about it, my 40G plan costs 65.94 (as part of my service) which is roughly $1.65/G - however my overage charge is 2.94/G which is 80% more expensive - 40G at that price would cost 117.60!

Don't get me wrong, I'm content to pay for what I use, but I do think Vodafone should be fairer with the price and yes it's my choice to select that plan which is an extra $10 for 20G (0.50/G). Would it really kill their profits to charge me at the same rate per Gig as my plan is currently?

I know I'm slightly off topic but the point I'm making is we are never going to achieve a cap free general service while this kind of pricing is still being used.

Incidentally, yes I prefer to be charged than throttled back.

I've always understood BB to be a low margin product sold bundled with phone to make money on toll calls. Would it kill the profit to give you and you only a deal like that. Nah I doubt it. Multiply that by all customers and well that's a pretty bit of change isn't it.

It's pretty much the same model on naked - in fact with naked it's a better deal - $2.95 will get you 2GB on the 60GB naked plan (there isn't a 40GB plan to compare but the 60GB additional data is $2.95 for 1GB).
Sorry just rechecked and 60GB plan is $2.95 for 2GB on naked and with phone.

I know we'll never know, but I wonder how much is earned for the additional data charges. We can only speculate. As I said though, while there is this kind of pricing it is unlikely that we will see competitive uncapped broadband.

Procrastination eventually pays off.

maxzzz

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#827250 28-May-2013 19:07

That is a very interesting discussion.

I think the business model (data caps) used to sell communication services is mainly based on two things:
- Economics of course (the basis of our world economy is to sell what we don't have - unfortunately)
- People's habits (selling with caps is seen as "normal" for most Kiwis)

Let me give you the example of New Caledonia, an isolated island not far from us where 95% of the content accessed online comes from France (so it is similar to NZ where most of the content is being imported from the US).

They have around 120 000 broadband customers (compared to 1,5M+ in NZ) and the model used is to "sell by speed" :
- NZ $65 for up to 2M/1M unlimited (0.5M international download speed guaranteed)
- NZ $97 for up to 4M/1M unlimited (1M international download speed guaranteed)
- NZ $113 for up to 8M/1M unlimited (2M international download speed guaranteed)
- NZ $126 for up to 16M/1M unlimited (4M international download speed guaranteed)
These prices include unlimited VOIP to landlines in France.

But it wasn't always the case, broadband first appeared in New Caledonia with ridiculously small and expensive data caps which really prevented ADSL from being adopted.
In fact, France was the only point of comparison for most of the people living in this island. Even if the economics are completely different in Europe, they did not understand why Internet was unlimited full speed for 30€ compared to super expensive quotas in New Caledonia.

Therefore after only two years, all the ISPs decided to move to the "pay by speed" unlimited plans to mimic the French model and from that moment, broadband became widely adopted. New Caledonia now have its own private fibre optic cable to Sydney since 2008 (Gondwana-1) and prices are decreasing every year.

Proportionally, ISPs over there are much more transparent than in NZ. Some of them actually publicly display real time usage graphs of their international capacity. I would love to see that more often with NZ ISPs!

My point is: the market dictates how a commodity is sold, if it does not work in one way, economic actors have to find other ways...

I would personally like a system that has a bit of both: you pay for a quota of "premium bandwidth" if you go over your speed is not reduced to a ridiculous 64K but something like 2M. This would be fair for everybody.

kyhwana2

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#827252 28-May-2013 19:17

Wow, that graph of the NC ISP is neat. I'd like to see the same here, but it'll never happen. ISPs here are afraid of sharing anything like, let alone how their networks are setup and how much BW they buy..

raytaylor

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#827253 28-May-2013 19:17

freitasm:
myfullflavour: ... unlike the energy sector where the measurement is in units, bandwidth is sold as a speed.

Here's the thing: ISPs buy gigabits per second (speed) but sell gigbytes (quantities)...

When an isp is large enough, and the pipe is fully saturated for most of the day, and QOS takes over, those gigabits start to have a value in gigabytes.

Eg. 1 megabit = 320gb a month when fully saturated.

So across a wide range of customer types who all vary their usage, you can get averages and so it makes sense not to charge based on megabits but instead gigabytes.

So for our network, I am working towards a daily connection charge + data usage model.
In about 3 months once our billing system is finished, we will be offering a set per month cost for a connection, and pay a super low per-gigabyte price for the data that you use.

Our existing system works very similar to this.
You pay $50 for a monthly connection, which includes 10gb of data and then the billing system automatically sells you 5gb blocks which it will bill you for at the end of the month.

I am hoping to change to a $1.32 daily connection charge + 1c per megabyte (depending upon what our upstream buying power can allow)
For lower end users it still gives them a 10gb allowance for $50 per month, while being cheaper for higher end users.

This is the type of connection i think every ISP should be selling by.
Or using traffic managment to offer unlimited packages.

If we look at the model in the USA - your plan is simply the same as every other that the isp offers, except the Peak Information Rate changes. For most home connections you dont see a change in the Committed IR on the plan. This is why it never made sense to me when selling by the megabit to the end user. New Zealands model has had it right all along (well since ADSL pricing went economical for FS/FS) - give maximum speed avaliable and charge by the gigabyte or data block.

When comparing the ISP industry to electricity, it can become a little difficult due to one big difference.
In the ISP industry, we dont usually have the ability to slow down our upstream connections.
Eg. if we only need 10 megabits between 3am and 5am, but need 50meg during the day, we cant turn the pipe down - we still have to pay for that 50meg.
The electricity companies can switch off a turbine and generate less electricity when there is less demand.
We have to buy the electricity/data 24-7 even if its not being used. To solve this, we use off-peak deals and customer type averages to balance as much of the load as possible.

Ray Taylor

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ChillingSilence

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#827254 28-May-2013 19:29

France is much nicer though, I have a seedbox with Gigabit connectivity for the first 3TH of data, then it slows to unlimited at 100mbps...

Legit have downloaded a "Linux ISO" at over 800mbps!

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richms

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#827278 28-May-2013 19:54

plambrechtsen:

I would say out of the issues I have dealt with over the last 6+ months, perhaps 1 or 2 were related to the old Telecom supplied modem. I have only had one customer fault with the new one (TG582N). That is from dealing with well over 100 folks in that time.
The vast majority of issues is poor internal wiring causing fault. And with that... Most people see the $100 (wlg with Cyril7) or $150 (akl coffeebaron) vs $200+ (Chorus) to get a Master Filter as a good investment, but there have been approximately 20% of the folks I have dealt with that refused to put any investment in and expect their provider to pick up the tab... So IMHO it goes both ways.

Perhaps providers should stop offering service to people with a history of line issues that have not had their wiring sorted? You cant get power onto a house with 1930's wiring in it, why should the internet be any different? Those crap installs hurt everyone with their need for higher levels so resulting crosstalk.

Richard rich.ms

maxzzz

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#827279 28-May-2013 19:56

ChillingSilence: France is much nicer though, I have a seedbox with Gigabit connectivity for the first 3TH of data, then it slows to unlimited at 100mbps...

Legit have downloaded a "Linux ISO" at over 800mbps!

Yes with OVH the bandwidth is very cheap and since their new datacenter in North America their connectivity to the Pacific is really improved :)

richms

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#827280 28-May-2013 19:56

ChillingSilence: France is much nicer though, I have a seedbox with Gigabit connectivity for the first 3TH of data, then it slows to unlimited at 100mbps...

Legit have downloaded a "Linux ISO" at over 800mbps!

I have seen a 400MB torrent move from queued to completed in one update of the deluge web UI on my seedbox. I am sure that most of the peers would have been in the same aisle of the data center, if not the same rack.

Richard rich.ms

ChillingSilence

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#827286 28-May-2013 20:02

richms:
plambrechtsen:

I would say out of the issues I have dealt with over the last 6+ months, perhaps 1 or 2 were related to the old Telecom supplied modem. I have only had one customer fault with the new one (TG582N). That is from dealing with well over 100 folks in that time.
The vast majority of issues is poor internal wiring causing fault. And with that... Most people see the $100 (wlg with Cyril7) or $150 (akl coffeebaron) vs $200+ (Chorus) to get a Master Filter as a good investment, but there have been approximately 20% of the folks I have dealt with that refused to put any investment in and expect their provider to pick up the tab... So IMHO it goes both ways.

Perhaps providers should stop offering service to people with a history of line issues that have not had their wiring sorted? You cant get power onto a house with 1930's wiring in it, why should the internet be any different? Those crap installs hurt everyone with their need for higher levels so resulting crosstalk.

an it just sucks when it's the line to your house.

d the wiring in my home totally redone. CAT6 from the demarc the whole way through the house thanks to a friend who does that for a living... not even lying, 45 Chorus visits later...

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