Who's telling the broadband cap truth?

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rickcrawley

31 posts

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#33239 4-May-2009 17:09

Are broadband data caps so low in New Zealand because of the southern cross cable prices or are isps just saying that? the reason i am asking is because i just read from a southern cross cable employee that 30gb of data to or from the usa costs an isp only $10:

http://www.stuff.co.nz/technology/459248

So wouldn't that mean an isp could offer a 90gb cap for $100? $30 goes to southern cross and the isp keeps $70 to spend on expenses and for profit.

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51 posts

Master Geek

#212162 4-May-2009 17:34

ISP also pays telecom to use their exchanges/cabinets (telecom over-charges a huge amount i think). There are other costs also to be considered, such as staff salaries, running costs.

It's all part of telecom's strategy to try to CONTROL the market in favor of them. I think that is the single big factor that has driven the cost of broadband still high up in NZ.

by at the end of the day,
No one in business tells the TRUTH about everything do they?

Why would you pay $3-$5 for a cup of coffee where the cost is less than 50 cents? Do they want people to know the actual cost? I'd say they prefer not to tell people about it.

jpollock

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#212169 4-May-2009 17:45

That fee probably doesn't include termination charges at the other end, merely access to both ends
of the connection. US carriers are notorious about charging for access. The "brownouts" that happen worldwide are because there are disagreements in peering fees between the backbone network providers.

Additionally, the price on the southern cross cable is currently depressed because Telstra has announced that they are going to be pulling all of their traffic off of it and onto their own cable. Since they represent half of the traffic on the cable, that's a significant loss in income.

So, competition will keep those prices at their current levels. Otherwise, they will creep back up.

That's not to say that the prices are cost+, merely that there's more to it than the Southern Cross carriage fees.

Additionally, the traffic was mentioned in terms of $/byte of transfer, however the fees are actually $/bit per second. With that calculation, the price of the movie is only appropriate if it can be transferred at any time of the day, not just in the peak hour.

In fact, their math pretty much assumes that, although using the figures in the story (500k/155mbps), I come out with a price of NZ$25 for that 30GB(!) file, almost double the NZ$10 price in the story. Perhaps I've got my math wrong, please feel free to do it yourself, it's not that hard:

30,000MBytes * $/mbps/yr * bits/byte * s/yr = $price

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nzbnw

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#212186 4-May-2009 18:33

newbiejam: It's all part of telecom's strategy to try to CONTROL the market in favor of them. I think that is the single big factor that has driven the cost of broadband still high up in NZ.

Are you for real? The comcom set's WBS, UBS and LLUC pricing, so you're argument is completely laughable.

nzbnw

coffeebaron

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#212196 4-May-2009 18:48

OK, lets do the maths another way:
Price in US dollars, therefore comes out at $17 per 30GB (but lets say 15 to make the maths easy). So we now have 50c per GB

Now the other thing to keep in mind here is ISP's don't buy the bandwidth by the "amount", but by how wide the pipe is. So that means to achieve that price, the bandwidth needs to be evenly spread across 24hrs per day. It is not.
Peak time is usually a six hour (1/4 of day) chunk between 6PM & midnight. Therefore that price per GB is now x4 at $2 per GB.

Now we know we don't use all our data during peak, but my guess is at least 1/2 a users data is consumed during peak time; therefore we can 1/2 that amount = $1 per GB.

So $1 per GB, before margins, Telecom back-haul etc etc.

Obviously my figures are a bit of guess work, but I think you'll find they will illustrate reasonably accurately how data to the end user ends up being charged.

YES international data to NZ is EXPENSIVE

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newbiejam

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#212204 4-May-2009 19:21

Are you for real? The comcom set's WBS, UBS and LLUC pricing, so you're argument is completely laughable.

nzbnw

So you think comcom has done a good job setting those high prices? Last time I remember those prices set gave the other ISPs so little margins to play with.

And it sounds like Telecom is now proposing to set even higher prices for cabinets.

Ilmarin

94 posts

Master Geek

#212213 4-May-2009 19:43

What I'd like to know is the $/Mbps figure, as it's rather a lot closer to reality. The $/GB amount that ISPs charge is a fudge that balances pipe utilisation against profitability against market expectations. If the $/Mbps rate has gone down, then no doubt the main reason that end user prices haven't gone down is because Mbps demand has increased, ergo ISPs have to purchase more bandwidth for the same number of customers. But, I suspect the $/Mbps rate for NZ ISPs, as well as being way higher than trans-atlantic rates, is probably also much higher than North America Asia rates as well, especially with Unity cable bandwidth coming online in the next year or two.

Whether Southern Cross Cables are overcharging or not is irrelevant next to the need for competing cables. The free market can't dictate pricing while a monopoly persists.

coffeebaron

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#212218 4-May-2009 19:54

Ilmarin: What I'd like to know is the $/Mbps figure, as it's rather a lot closer to reality.

About $75k per month for 155Mbps

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jpollock

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#212221 4-May-2009 19:57

newbiejam:

So you think comcom has done a good job setting those high prices? Last time I remember those prices set gave the other ISPs so little margins to play with.

And it sounds like Telecom is now proposing to set even higher prices for cabinets.

Why there's little margin (for competitive ISPs) becomes obvious once you know how the price is arrived at for the wholesale plans. That's why LLU is so necessary, and why they are fighting so hard to make it happen.

Now, this is old information, so it may have changed, but this is how it is determined the last time I checked.

1) The regulator obtains TNZ's total revenue from their ISP business.
2) The regulator then divides that revenue by the number of customers.
3) This represents the Average Return Per User.
4) The regulator then subtracts an acceptable margin from that.
5) the ARPU - margin == wholesale price.

However.

1) This price is only set once per quarter.
2) Since it is the average over the entire customer base, it doesn't properly reflect the bottom end of the market.

Therefore, Telecom will _always_ be able to undercut the wholesale price because they can immediately drop their prices after the regulator sets the price for the quarter.

Additionally, new entrants can't poach the volume end of the market. In order to obtain the same margin, they have to have the same distribution of customers. Something that they have no desire to do.

So, I would have to say, "Don't hate the player". TNZ didn't make the rules.

I can't speak about cabinets, I don't have any information on how they work. Personally, I think that carriers have figured out that it is cheaper to spend NZ$30m lobbying government instead of NZ$2b rolling out a new network. I don't have a lot of sympathy for that.

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jpollock

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#212223 4-May-2009 19:59

coffeebaron:
Ilmarin: What I'd like to know is the $/Mbps figure, as it's rather a lot closer to reality.

About $75k per month for 155Mbps

The article's quoting 500k/yr for 155Mbps. Perhaps a renegotiation is in order! :)

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nzbnw

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#212226 4-May-2009 20:12

newbiejam:
So you think comcom has done a good job setting those high prices? Last time I remember those prices set gave the other ISPs so little margins to play with.

It doesn't matter what I think on this issue, I just want you to do some research before you make baseless claims.

You're beef so to speak lies with the Com Com not TNZ Wholesale / Chorus.

nzbnw

newbiejam

51 posts

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#212237 4-May-2009 20:50

True. Thanks for pointing out.

I wonder what would "acceptable margin" mean.

Can you explain what you mean by lobbying Government with $30m?

True that LLU was fought hard by ISPs and won, but Cabinets seem to be another way to bend the rules ever since LLU started :O

I'm eager to see what will ComCom do for sub-LLU.

jpollock

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#212264 4-May-2009 22:09

newbiejam:

True. Thanks for pointing out.

I wonder what would "acceptable margin" mean.

Can you explain what you mean by lobbying Government with $30m?

True that LLU was fought hard by ISPs and won, but Cabinets seem to be another way to bend the rules ever since LLU started :O

I'm eager to see what will ComCom do for sub-LLU.

Have a look on the websites, the documents are very open about their calculations.

As for lobbying, TCL (for example) was very big on rolling out their own network. Then the government changes, and the new government was receptive to local loop unbundling. All of a sudden, TCL stops all further rollouts and begins lobbying for LLU. I don't have a reference for the 30m number, so consider it BS.

As soon as it became obvious that the government would be receptive to changing the regulatory environment, network rollouts stopped, and carriers started pointing fingers.

We can see what happens when a carrier is actually able to get on with it (and encouraged to do so), TNZ and Vodafone have both rolled out 3G networks.

As for cabinet space allocation, carriers are already complaining. VF is complaining (essentially), that since their market penetration is so low, the number of customers/cabinet will be so low that it will result in too high a per-port cost (small, low density DSLAM). Basically, they're asking for lower wholesale rates, but in a round-about way.

Anyways, this is off topic, since we started out discussing Southern Cross Cable access charges. It seems that the article has some dodgy math in it.

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Screeb

698 posts

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#212277 4-May-2009 22:27

Ilmarin:
Whether Southern Cross Cables are overcharging or not is irrelevant next to the need for competing cables. The free market can't dictate pricing while a monopoly persists.

This. No amount of calculation, speculation, or mere conjecture is going to give any useful information while SCC remains a monopoly. Competition is the only way to find out an appropriate price.

Ragnor

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#212281 4-May-2009 22:29

From what I understand Cabinetisation was mandated before operational separation of Telecom Wholesale, Telecom Retail and Chorus... also before LLU entered the picture. Vodafone and Orcon no doubt knew about cabinetisation before they embarked on installing equipment in exchanges. I guess they can gripe about Chorus being too good at deploying cabinets / ahead of schedule but that's very trite.

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?

Australia already has many submarine cables refer to:
http://telegeography.com/products/map_cable/images/Cable_Map.gif

jpollock

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#212289 4-May-2009 22:37

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.

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