John Linton
Something I have been giving a lot of thought to since I returned to Australia has been the pricing of ADSL2 services. Exetel was the first, and for almost a year (from June 2006 to May 2007), the only partner Optus had in delivering their ADSL2 service that included the rental of the telephone line and the calls over that line.
We went through the many, many problems caused by the problems and errors with evey aspect of the Optus provisioning and maintenance systems as well as the major provisioning issues with their backhaul network. However, thanks to the dedication of some very, very competent Exetel personnel, the issues caused were overcome and the service delivered became better month on month.
We had expected the problems and issues, but had not expected the severity or longevity of those issues. What we hadn't expected was the major difference the very much faster individual download speeds would make to peak usage bandwidth demand (both ingress/egress and customer to and from Exetel). Our original estimates (and yes, we did know the demand of an ADSL2 user would be much greater) were blown away by the actuality of what happened.
We had expected an ADSL2 user to average a bandwidth demand of 4 times (at any given millesecond over each 24 hour period) than a 1500/256 ADSL1 user. We were wrong by a factor of 2 with aggregated demand of 1,000 ADSL2 users averaging 8 times more bandwidth demand that a higher speed ADSL1 user. This posed some problems but as we were, in the early stages of development in June through October 2006, not adding that many ADSL2 users it was operationally relatively easy to cope with.
What impact this really had was on the costing of the service as Optus charged a very high price for the backhaul of the data from the customer to Exetel compared to the charges made by Telstra Wholesale for ADSL1.
The double whammy of a high per mbps cost of backhaul coupled with the high peak usage of ADSL2 customers made a massive, negative, impact on the cost of providing an ADSL2 service. - and one that we had no previous experience with.
After a year of slowly growing the number of ADSL2 customers on the Optus network (now well over 5,000 Optus Network ADSL2 users) we have a much better grasp of what an 'average' ADSL2 user will need and have provisioned the Optus backhaul connections accordingly.
All this meant that I have struggled to find ways of offering lower costs to provide ADSL2 services. I'm excluding trickery and mis-representation from the equation as Exetel has always had very honestly priced plans.
The issues are simply related to the costs charged by Optus to Exetel for the ADSL2 service and the telephone line rental and the call costs and the cost of IP bandwidth charged to us by Optus, Verizon and PIPE.
I did a quick check of what other Optus Wholesale ADSL2 ISPs were offering and was amazed to see that, basically they were all offering Optus ADSL2 at way below the cost Optus would be charging them for a basic connection (excluding the IP bandwidth costs and the other costs associated with the service).
I must ask our supplier manager to re-approach Optus Wholesale on the costs they are charging Exetel because they must be charging those other ISPs far less than they are charging Exetel - which is disappointing because Exetel buys far more than those other ISPs from Optus and was an intrgral part of Optus correcting the huge number of errors in their ADSL2 delivery systems.
The current costs that Exetel must pay to deliver an Optus ADSL2 service are (GST inc):
ADSL2 port - $24.20
Line rental - $26.40 (less up to$4.40 of call charges - assuming the customer uses more than $4.40 of wholesale cost calls)
Backhaul - equivalent to $0.80 per gb downoaded
IP - equivalent to $1.10 per per gb downloaded
It's a really tough ask to find a way of reducing our current ADSL2 pricing (and the effective charge for the monthly telephone line rental of $25.00 and the low per call type charges).
It appears to me that those other ISPs who are offering ADSL2 services at their current below cost pricing will quickly go the way of all other ISPs who think that selling at below cost can be made to work in any commercial operation. At least one of them (aaNet/EFTel) recently went broke doing that so it's not as if they don't know what happens when you sell services below cost.
At least at this moment, the only price change I would consider making is upwards.