John Linton I don't know about your Sunday papers but mine had FOUR different 'special offers for broadband. I only read the sports section, Mia Freedman's column and the movie reviews so I don't know whether there were more ads on the actual pages. The one that leapt out at me, both for its garish primary colours and its offensive abuse of animals, was the Optus 'special offer of $99.00 for broadband with 20 gb of downloads, telephone line, free wireless router, free install and free local, national and calls to Optus mobiles on a 24 month contract.
Two things struck me on seeing this ad:
1) Optus marketing must believe there is a market for people to spend $99.00 a month on broadband
2) Optus must have very low internal costs to make this offer work for themselves
Exetel buys ADSL2 services from Optus but pays around $50.00 for the combined ADSL and telephone monthly rental plus around 60 cents per gb of traffic to the customer.
On top of that Exetel has to pay aproximately 80 cents for traffic to and from the internet and our cost of a wireless router plus delivery would be around $60.00 - once only.
We don't have anything like the number of telephone users that Optus would have to arrive at an accurate assessment of estimated call spend once there is no charge for the majority of calls but the average cost to us, for Optus telephone customers, is around $16.00 per user per month.
So assuming a 24 month contract to recover the cost of the modem we would cost this offer as:
modem recovery - $2.50 ($60.00 divided by 24)
port/line cost- $48.00
Optus traffic charge - $12.00 (20gb x 60 cents)
IP traffic cost - $16.00 (20 gb x 80 cents)
Call costs - $16.00 (estimated on current charged spends)
This would give us a cost of $94.50 plus GST = $103.90.
Of course - maybe the average downoads would be less than 20 gb and that would make it margiinally profitable for Exetel.
We think Exetel is a very efficient company, far more efficient than Optus, so we would have a lower 'on cost' than Optus and we certainly don't spend millions a month on advertising and those differences would, quite possibly, close the gap between our wholesale costs from Optus and their own internal costings to themselves.
Last time I looked at our customer by spend analysis we would have had less than 5% of our total users spending more than $100.00 a month on broadband and telephony.
It seems that Optus believes there is a market for such a product combination and, I assume, this is based on what they have achieved with their lower cost/lower download FUSION plans.
I'm tempted to try out such a combination at prices lower than Optus is offering and offering with ALL calls bundled (not exclude mobile and international calls) - by using VoIP to reduce the call costs and using the current Optus Wholesale offer of zero install cost to reduce the 'pain' of the zero activation/no cost modem freebie.
Perhaps also with a 12 month contract instead of Optus' 24 month contract as, from what I've seen, 24 months is a turn off right now.
One of the reasons for experimenting with such an offer is that the new P2P caching servers. switches and routers arrived yesterday and that project is on time which, if the tests are successful, will reduce the IP bandwidth costs by around 40%.
The attraction is to increase our VoIP minutes and to also see if we can increase the percentage of Exetel customers who spend more than $80.00 per month.