John Linton ....or would it be more appropriate to describe it as 'mis-information'?
...I'm referring to some of the statements, ascribed and unascribed, in this:
http://www.theaustralian.news.com.au/business/story/0,28124,25531169-36418,00.html
and this:
http://www.news.com.au/technology/story/0,28348,25540041-5014239,00.html
Whoever felt that they should make the statement that "Broadband costs will halve" needs to stop smoking the heavy stuff while writing for publication - it makes them look ridiculous.
"Pure" IP bandwidth was a significant component of providing an internet service to Australian users since the bad old days of the mid 1990s (when Telecom Australia charged 27 cents per MEGABYTE to the few wholesale ISPs silly enough to pay them for such a service) and then some $A2,000 per gbps in the late 1990s spiraling downwards below $A1,000 by 2001 and then below $A500.00 by late 2002 and then reducing by around 20% a year since that time to a little over $A100.00 for a "medium sized buy" today (less than a few gbps). Of course, caching and related technologies dilute the per gb delivered to the customer price paid by the ISP to less than $A100 today which, when you look back, is a pretty amazing price drop over the past few years.
Depending on how you look at your usage (and a conservative view would be that you get an actual usage of of around 75% out of your total bandwidth) and a rough/near enough calculation shows that 1 mbps can deliver around 300 gbytes of data in an average month the current wholesale price of IP bandwidth costs an ISP around 40 cents per gigabyte to which cost has to be added the cost of the link between the customer and the ISP which will vary greatly depending on how much of that infrastructure is owned by the ISP - but it will add something - in Exetel's case it adds about another 5 - 10 cents. So, depending on the buying power of the ISP it costs something less than 50 cents per gigabyte in 'raw' cost to ship data to an end user (before amortization of the equipment and the other costs associated with running the ISP's business).
So it can be seen that at an average usage of something around 5 gigabytes per residential customer (up from around 2 gbytes some 4 - 5 years ago) the cost of IP bandwidth isn't very significant in the cost of providing a 'complete' internet service to a residential user - contrary to all the statements and implications in the referenced articles....around $2.50 per user at today's, non-Pipe rates. What is true is that Australian ISPs probably do pay between 5 and 10 times more for IP bandwidth than USA ISPs but that can be understood based on the cost of 10,000 kilometers of deep ocean cable versus 50 meters of in ceiling cross connect fibre in a US data centre co-location facility.....but until someone finds a way of delivering data, at acceptable speeds, without incurring the costs of trans-Pacific cable that is not going to change very much.
Having said all of that, the ongoing problem with operating any commercial business is to ensure that your actual costs of buying the 'building blocks' you need to deliver your services are not going to either send you broke or put you at a commercial disadvantage vis a vis the companies you compete with at the moment or in the future. So whether you pay $3.00 or $2.50 for the average end user's IP data is going to make a difference but.......well.....there are many other parts of the 'building block' equation of delivering internet services that can be much more easily addressed....at least I would have thought so.
In further explanation of how relatively insignificant IP bandwidth costs have become in the whole internet provision equation, this comment probably emphasizes it better than anything I can say:
Mr Malone said: "The company is seeking to hand on the cost savings to consumers in the form of increased download quotas somewhere in the vicinity of 15 per cent."
(I see no mention of "halving the cost of broadband - do you?)
Now I may be cynical but that seems to be a non-offer if in fact iiNet have obtained any sort of savings by taking the risk of basing their ability to supply internet services on a start up cable provider. By providing no plan reduction cost but offering what appears to be 12.5% more bandwidth (which on iiNet's low end ADSL2 plans would be a 'princely' 125 megabytes in peak time) he appears to be trivialising the 'value' iiNet will receive for the risks being taken to totally inconsequential. Offering an additional 12.5% on the low end ADSL2 plan is the financial equivalent of around 5 cents per month - all that can be said about such munificence is - "WOW!!"....but it does emphasize the relative unimportance of IP bandwidth costs in terms of providing actual services to end users. (obviously being a bit cynical when it comes to public statements by media groupies - I wonder when these 15% increases will be put in place? I think it would be laugable to try and make anyone accept a statement that "iiNet is increasing your quota from 1 gbps to 1.125 gbps as part of a major cost saving we have achieved with buying IP from Pipe rather than from Southern Cross".... I could, of course, be quite wrong).
Before I went to Sri Lanka, Steve and I had lunch with the CEO of a very large international carrier that doesn't really provide wholesale services in Australia at the moment but who might increase their presence here in the not too distant future. I almost never attend 'get to know you lunches' but I made an exception on this occasion as I am always interested in possible new sources of key services and we have had sporadic contact with this company over almost ten years but they have never had anything we could sensibly use. They were predictably reticent about their future plans but were interested in "making special arrangements" and providing IP bandwidth to us in the not too distant future (as I'm sure they would be interested in providing IP bandwidth to anyone else who wanted to buy from them). Their views of the viability of the Pipe venture were, given the unfailing nature of their cultural background being overt politeness at all times especially when talking about other suppliers, surprisingly 'candid'. They made thinly veiled references to their views on the Pipe cable which would have concerned me if I had been thinking of using it - as I have never encountered such 'frankness' from such a source about a theoretical 'competitor' before.
Exetel have decided to use Southern Cross (bought through Optus) for our IP needs for the coming 12 months and we will see what happens in the IP marketplace between now and next March when we review our IP contracts. In general terms there isn't much differentiation between the various SX 'wholesalers' and AJC direct - buying AJC/Telstra's own cable is still more expensive than any other IP provider - at least as far as Exetel is concerned. Where IP pricing will be next year is not even guessable by us but we will continue to use the benchmark of buying 2 x 2.4 gbps circuits direct from SX ourselves as the pricing benchmark for the time being and will stop buying from a wholesaler if our direct buy from SX becomes lower cost than a wholesale price. Also by next year there may be a new carrier providing 'pure' IP which may change the process more than it is being changed at the moment.
So I can only hope that the ISPs supporting Pipe don't get too much of a pricing edge for the risks they are taking - but, in the scheme of things, IP prices dont really affect the provision of cost/effective internet services in Australia too much these days.....if only we could get a 20% reduction on broad band port costs - now that would make a difference.
Pipe delivering a "50% reduction in broadband pricing"?....must qualify as the stupidest statement of the year so far - and there's a lot of competition for that title.