Broadband rip off....

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insane

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#285200 26-Dec-2009 00:46

jtbthatsme:
I still stand by my first reply on this though we will not see real competition until there is a second line into the country. Basically as Telecom have the network all to themselves how can you create real competition (unless you count Telstra with their limited reach of cable as competition).

Real competition needs to become a priority as onsellers can't generate much competition as whomever they buy off can always undercut them. Why do you think most companies have similar pricing.

While a second major transit link to Australia and the States would have some affect on driving down costs but I dont think it would make as much difference as you think.

There is quite a bit of competition out there any many international IP transit provders to purchase bandwidth through. Southerncross have slashed their prices over the last few years quite dramatically which has caused a roll on effect on the pricing from GGI, Telstraclear, PACNET, Verizon, Vocus and AT&T.

The bandwidth cost is only one portion in the total cost of providing DSL to users though, the Telecom leased DSL port prices make up the biggest part of your DSL bill by far, and Telecom/Xtra also have to pay for the port costs from Telecom Wholesle just like any other ISP. Then there is also the cost of marketing, staff, support and network/systems costs so it all adds up.
Totally agree that if there was another national physical phone line provider out there that the DSL port costs would be far far lower.

I believe most ISPs have similar pricing as they offer just about the same service. There are not many ISPs out there which can honestly say that they have a service which is clearly different to the competition.

When was the last time people made a huge fuss about the cost of lamb in NZ or the price of cheese or even electricity. It seems that some people base their whole perseption of a country on their Broadband offerings alone, which to be honest, is not that bad at all if you shop around.

Screeb

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#285247 26-Dec-2009 12:39

insane:
There is quite a bit of competition out there any many international IP transit provders to purchase bandwidth through.

Uh, yeah, all through SCC. (unless you want to go the slow, long way).

insane:
Southerncross have slashed their prices over the last few years quite dramatically which has caused a roll on effect on the pricing from GGI, Telstraclear, PACNET, Verizon, Vocus and AT&T.

Then why have TelstraClear's cable broadband prices done nothing but increase (with the same caps, etc) the last 3 years? We haven't yet seen any benefit from lower SCC prices.

Also, Southerncross only decreased their prices because of the threat of PPC-1. And the prices are still too high. Not to mention that most buyers are tied up with more expensive contracts under the old prices until the end of time (in internet years), so the current price is irrelevant.

insane:
The bandwidth cost is only one portion in the total cost of providing DSL to users though, the Telecom leased DSL port prices make up the biggest part of your DSL bill by far, and Telecom/Xtra also have to pay for the port costs from Telecom Wholesle just like any other ISP. Then there is also the cost of marketing, staff, support and network/systems costs so it all adds up.

Then why do we have such low data caps? Increasing/removing data caps wouldn't increase the marketing, staff or support costs.

insane:
I believe most ISPs have similar pricing as they offer just about the same service. There are not many ISPs out there which can honestly say that they have a service which is clearly different to the competition.

Wow. Are you serious? If the services are just about the same (which I agree, they largely are), then they should be competing on price. This is basic economics. The reason that doesn't happen is bandwidth prices due to no competition further up the chain (SCC).

insane:
When was the last time people made a huge fuss about the cost of lamb in NZ or the price of cheese or even electricity. It seems that some people base their whole perseption of a country on their Broadband offerings alone, which to be honest, is not that bad at all if you shop around.

Well, someone complained about the price of cheese exactly one post before you...

Besides, this is a geek forum, not a food forum. Also, our broadband is much worse compared to other countries than our prices of lamb, cheese and electricity are compared to other countries.

insane

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#285332 26-Dec-2009 23:04

Screeb:

Uh, yeah, all through SCC. (unless you want to go the slow, long way).

Indeed that is correct, no arguaments there, but it hasn't stopped them lowering their prices which have been passed onto wholesellers and onto ISPs. Consumers will never believe the prices are low enough no matter what the price is.

Then why have TelstraClear's cable broadband prices done nothing but increase (with the same caps, etc) the last 3 years? We haven't yet seen any benefit from lower SCC prices.

Also, Southerncross only decreased their prices because of the threat of PPC-1. And the prices are still too high. Not to mention that most buyers are tied up with more expensive contracts under the old prices until the end of time (in internet years), so the current price is irrelevant.

That's a question you should ask TelstraClear directly. Logic would suggest they are making more profit or re-investing it to provide ner services such as their LLU undertaking. Customers do have choice, they can use ADSL instead if they do not like the cable pricing. My personal experience with Paradise lightspeed 10/2mbps service was quite something and I'd be willing to pay extra for it.

ISPs can and do re-negotiate their pricing with their wholesellers. If an ISP was trapped into a fixed term contract then I suspect that they only purchase bandwidth from one supplyier or have negotiated a VERY good price already which prompted a fixed term contract.

Then why do we have such low data caps? Increasing/removing data caps wouldn't increase the marketing, staff or support costs.

I'm sure you're read/taken part in discussions of why we have data caps in NZ before. NZ ISPs have also experienced a near doubling of bandwidth requirements over the last year, the majority of users don't download that much per month but when you give bandwidth away for free, people waste it (torrent plan, go large/big time).
HIGH usage customers are costing the ISP more each month becuase they have to purchase larger backhaul circuits and route the extra traffic which means network costs are increasing too. ISPs are businesses and need to return a profit to their shareholders at the end of the day.

Wow. Are you serious? If the services are just about the same (which I agree, they largely are), then they should be competing on price. This is basic economics. The reason that doesn't happen is bandwidth prices due to no competition further up the chain (SCC).

Yes they should be competing on price, however they cannot sell a service at a loss so it has to bottom out somewhere or they need to differentiate.

In case you're wondering ,I'm not 'picking a fight' by quoting you so much, just trying to also promote discussion which has been good so far

. My rambelings may seem odd or biased towards ISPs but working for one gives you a very different picture of the industry.

Screeb

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#285354 27-Dec-2009 00:29

insane:
Indeed that is correct, no arguaments there, but it hasn't stopped them lowering their prices which have been passed onto wholesellers and onto ISPs. Consumers will never believe the prices are low enough no matter what the price is.

Except that the supposedly lower prices have by and large not been passed onto consumers.

That's a question you should ask TelstraClear directly. Logic would suggest they are making more profit or re-investing it to provide ner services such as their LLU undertaking. Customers do have choice, they can use ADSL instead if they do not like the cable pricing. My personal experience with Paradise lightspeed 10/2mbps service was quite something and I'd be willing to pay extra for it.

ISPs can and do re-negotiate their pricing with their wholesellers. If an ISP was trapped into a fixed term contract then I suspect that they only purchase bandwidth from one supplyier or have negotiated a VERY good price already which prompted a fixed term contract.

The point is that if the lower prices were being passed down, then we should see it across the board - at least in some form, such as higher data caps, but we don't.

My understanding is that SCC only provides bandwidth on long contracts (or at least did in the past). Any resellers aren't going to be able to offer much better when they're limited by what SCC are providing, and again, it's my understanding that generally only smaller ISPs will buy from the resellers, whereas larger ones like TelstraClear will buy directly from SCC. I could be wrong on that though.

I'm sure you're read/taken part in discussions of why we have data caps in NZ before. NZ ISPs have also experienced a near doubling of bandwidth requirements over the last year, the majority of users don't download that much per month but when you give bandwidth away for free, people waste it (torrent plan, go large/big time).
HIGH usage customers are costing the ISP more each month becuase they have to purchase larger backhaul circuits and route the extra traffic which means network costs are increasing too. ISPs are businesses and need to return a profit to their shareholders at the end of the day.

You said that the majority of the cost is not in bandwidth. That means it should be entirely possible to offer plans where the customer can spend say twice as much for the "bandwidth" component and get twice as much data, yet still be reasonably priced (since it's apparently such a small portion of the cost). But instead, data is often the majority cost for the end user, especially when buying extra data on top of what's included in the plan - eg $20.48/GB for Telecom's Pro plan. Your assertion that non-bandwidth costs are the majority of the cost of a plan is only really true for the cheapest plans which contain so little "free" data that it's not surprising. If it's true that even on the plans with larger data caps the bandwidth is still only a small portion of the cost, then consumers are paying far too much for this tiny amount of extra data (as it often ends up doubling (or more) the price).

Yes they should be competing on price, however they cannot sell a service at a loss so it has to bottom out somewhere or they need to differentiate.

But since they're neither competing on price, nor differentiating, that means that they're not competing full stop. Which means either the ISPs are colluding (unlikely given the number of ISPs), or they're restricted by what they can get to resell, which comes back to the SCC - the prices being so high that there's no room for the ISPs to move (ding ding ding!).

Pinkfish

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#285402 27-Dec-2009 12:08

Screeb:
insane:
Indeed that is correct, no arguaments there, but it hasn't stopped them lowering their prices which have been passed onto wholesellers and onto ISPs. Consumers will never believe the prices are low enough no matter what the price is.

Except that the supposedly lower prices have by and large not been passed onto consumers.

Well, maybe not directly. It could be possible that they're using those savings to increase their international bandwidth, thereby giving their customers a faster international connection.

Ragnor

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#285428 27-Dec-2009 13:55

They aren't running charities!

You have to consider there are many other costs (not just bandwidth) that are a factor, for example labour/staff costs, when have the wages/salaries ever gone down in recent memory?

SXC prices it's services at the same rates in NZ as in AU, in AU there are multiple competing submarine cables AJC, PIPE come to mind.

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Screeb

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#285456 27-Dec-2009 16:49

Ragnor: They aren't running charities!

You have to consider there are many other costs (not just bandwidth) that are a factor, for example labour/staff costs, when have the wages/salaries ever gone down in recent memory?

Like I said, these are fixed costs with regard to data consumption.

SXC prices it's services at the same rates in NZ as in AU, in AU there are multiple competing submarine cables AJC, PIPE come to mind.

None that compete directly with SCC. They take alternate, slower routes to the US. Besides, PPC-1 is brand new.

insane

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#285477 27-Dec-2009 19:24

Ragnor: SXC prices it's services at the same rates in NZ as in AU, in AU there are multiple competing submarine cables AJC, PIPE come to mind.

Screeb:

None that compete directly with SCC. They take alternate, slower routes to the US. Besides, PPC-1 is brand new.

I believe what Ragnor is saying, is that despite the SCC having the most direct route to the states they are still competitive. Some companies would be willing to pay extra to have reduced latency for latency sensitive applications so really the SCC doesn't have to lower its prices in the way it has.

As per the PM I sent you regarding a realistic breakdown of the Telecom adventurer 20GB FS/FS plan, the bandwidth component only makes up for around 20% of the total plan charge.
The DSL port cost makes up for around 70% of the plans retail price so if that can be reduced significantly then you may see a reduction in the price of plans across all providers or larger data caps.

exportgoldman

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#285522 28-Dec-2009 01:59

insane:
Ragnor: SXC prices it's services at the same rates in NZ as in AU, in AU there are multiple competing submarine cables AJC, PIPE come to mind.

Screeb:

None that compete directly with SCC. They take alternate, slower routes to the US. Besides, PPC-1 is brand new.

I believe what Ragnor is saying, is that despite the SCC having the most direct route to the states they are still competitive. Some companies would be willing to pay extra to have reduced latency for latency sensitive applications so really the SCC doesn't have to lower its prices in the way it has.

Even though the SCC cable is really the only game in town it's increasing it's bandwidth through upgrades every few years, and seems to pass those savings on, and I suspect also to keep the price of someone putting in a new cable right below the incentive to do so :-)

There was talk of a cable to Australia but that didn't seem to go anywhere.

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wjw

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#287174 5-Jan-2010 15:29

electricity prices

Go nuclear...

As far as broadband prices go, I've worked for ISP's in the UK and NZ. As people have mentioned before the price differences come down to economies of scale. This doesn't just make international transit cheaper, it means that there are more local CDN's, caches etc that makes the traffic national.

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