John Linton
I gave some more thought to what actually is happening with the provision of 'raw' and 'cached' bandwidth in Australia (and possibly other countries) as the apparent contradictions and confirmations from various sources seem to be capable of rationalisation. I also attempted to work out what was happening to the ADSL take up and user bandwidth growth over the past 12 months and what it might be like over the coming 18 - 24 months. With so little information to use these sorts of mental exercises are seldom truly useful but they are necessary in any macro planning that a business might do based on the knowledge that any conclusions should never be regarded as anything but a rough guide.
I read this:
http://www.zdnet.com.au/insight/communications/soa/Net-neutrality-is-an-American-problem-/0,139023754,339292161,00.htm
with a degree of amusement at what was trying to be said by the people that contributed to it but it served to reinforce the base rule of business - you can't stay in business in the long term by selling products/services below the cost of supplying them - yet, apart from Telstra (who as a monopoly is able to use the 'whatever it costs me I add 100% to arrive at the selling price' methodology of all monopolies) the ISP 'industry', like the mobile industry, in Australia seems to be based on doing exactly that. Of course, in reality, it doesn't do that at all but it certainly, at least currently, is a 'captive' of the "down loads included in this plan" end user pricing methodology - similar to the mobile phone 'capped plan' pricing methodologies.
Telstra has always been a proponent of the 'user pays for what user uses' ADSL pricing models with some large percentage of their user base paying a monthly access charge that 'includes' a tiny download allowance and if the allowance is exceeded pays a massive premium for additional usage. That has begun to vary over the past 18 months as Telstra has used its ADSL2 'special offers' to attack its wholesale ISPs customer bases but it pretty much is their pricing model.
Every other, at least to my knowledge, ISP uses pricing based on a range of included allowances with many using 'shaping/limiting' to dramatically slow a user if they exceed the plan's included allowance and the others simply charging at various rates from very low to almost Telstra like for down loads above the plan's allowance.
Virtually every ISP, including Exetel, offers plans with a range of download allowances which, if every user used the allowance exactly to its limit, would make the business either unprofitable or not very profitable. The reality of end customer usage, once a sufficiently large user base has been developed, is that only a very small percentage of users actually use the whole of their plan's allowance in any month with the overwhelming majority being cautious in selecting a plan that they believe will cover their most heavily used months. All ISPs who keep sensible usage records know exactly how much the users on each of the plans they offer actually use and the time frames in which they use it - a rule of thumb is that the average usage (across any 12 month period) is less than 40%. (this figure wouldn't apply to Telstra).
The costs of offering ADSL in Australia for a small ISP like Exetel have changed quite a bit over the past three years - almost always downwards in discrete terms but in actual end user usage terms they have remained pretty constant because the average amount of data down loaded has more than doubled on average. Doubtless those ISPs who have installed their own ADSL2 DSLAMs will have reduced their back haul and 'port' costs but those savings will have been reduced by the costs of finance and capital involved in the deployment and the uncertainty of the 'life' of any amortisation in terms of the twin impacts of "NBN" and HSPA/LTE. Irrespective of those future unknowns their current depreciation schedules would show a cost reduction compared to their previous pricing from a wholesaler.
So with 4 million ADSL users currently (according to the ABS) and with a growth of 1% a month with an 'end in sight' for further growth there are some changes that must inevitably occur. Another 'rule of thumb' would be that the total ADSL market would equal the current 4 million plus 80% of the remaining dial up users (approximately 1.5 million). At the current rate of (ABS sourced figures) 40,000 net new ADSL users per month this means that the ADSL market will have become saturated within three years at the current rate of growth and, depending on the impact of "NBN" and HSPA/LTE it may well cease growing long before that and have begun to contract.
Now, no such figures can be used as any sort of guide as they, as I said yesterday, don't seem to make any sense. However, and here's the thing, there is going to be a significant change to the use of ADSL versus HSPA and an even bigger change if "NBN" ever becomes a reality. It seems that, as with so many markets, just as everyone has got comfortable with the 'status quo' events will conspire to un-status the quo.
Which brings me back to the price of 'raw' and 'cached' IP and the method of pricing data services over any infrastructure (current, proposed or not yet dreamed of). The 'article' I referenced briefly touched on the possible 'sea change' within the US network providers methods of charging and how the final end to 'unlimited' as a catch all marketing position was imminent. Go a little further than that and the other analogies of petrol, electricity etc begin to have some sort of grim foreboding - or - if you're a reasonable person - some clearly logical outcomes.
Maybe ISPs will now stop offering 'plans' ( a curse from the mobile marketing legacies and the horrendous Telstra ADSL excess usage bills of the early days) and will become simply a monthly access cost (depending on service type) plus a per gb traffic charge? Something like:
ADSL1 - Monthly Port Charge 256 = $27.50, 512 = $32.50, 1500 = $37.50, 8000 = $57.50 with a traffic charge of $1.00 per gb peak/25 cents per gb of peak
ADSL2 - Monthly Port Charge $25.00 with a traffic charge of $1.00 per gb/25 cents per gb of peak
HSPA - Monthly Access Charge $5.00 with a traffic charge of $10.00 per gb
NBN (no matter who wins the 'tender' or if it ever gets built the charges will be 2 - 3 times these)
It is far too radical to be introduced in 'one hit' but, now we have started the process with HSPA, we will introduce a new range of plans on this basis over the coming months.