John Linton We are going to trial a new IP provider's service in the near future to see whether the large carriers 'insider's club' pricing is actually going to be 'broken' by the equivalent of an 'Exetel' in this area of the ISP business. In a previous rambling I briefly referred to the pricing concepts that Telstra thinks are appropriate for a 2.4 gbps IP feed and I also alluded to the larger ISPs (with the exception of TPG) pricing ADSL services just below Telstra's sky high pricing 'umbrella' as the norm in Australia. Effectively, all broad band pricing in Australia is locked in to the highest levels because of the sheer wastefullness of the two largest carriers and their inability to operate in a sensible financial manner.
I don't know whether the 'Exetel like' SX reseller will in fact be able to deliver what they promise or if their 'final price' will turn out to be as good as we need it to be. However their 'indicative' pricing demonstrates what SX bandwidth should be priced at by a company not burdened with too many operational overheads - and clearly they dont buy in the infinitely larger volumes of the three SX owners and other major carriers.
Exetel needs to buy IP bandwidth at higher volumes than at any time in the past five years. This is, mainly, because our residential broad band base (ADSL and wireless) has continued to grow each month for the past five years and our business user base is now expanding at a faster rate and - if everything works out - will grow at a far faster rate than at any time in the past.
So we currently deliver around 3.5 gbps at peak usage time to our broadband customers (2.6 gbps of 'pure' IP and another 900 mbps of cached/Pipe/WAIX sourced IP) and we expect that to grow that by around 1 gbps of 'pure' IP over the coming year to provide for the needs of residential users. If our planned business user growth is achieved then we could quite easily need another 2 - 3 gbps of 'pure' IP over the coming 12 months on top of the residential requirements.
So we have asked various carriers (and one 'Exetel like company') for quotes for 2.4 gbps to replace the current Sydney located 1.9 gbps link) and a further 1 gbps for the WA, SA, VIC, ACT and QLD PoPs with a further 1.8 gbps to be taken up over the coming 12 months should our business user plans work out positively.
So while we make no promises of what we will actually take up in excess of the 3.2 gbps of 'known requirements' we have asked for pricing, in a separate bid for 5 gbps and 10 gbps. No-one seems able, or perhaps willing, to provide pricing at that level so it may turn out that we will have to buy direct from Southern Cross in the not too distant future - but, after buying the new floor space we would need to take a very, very deep breath before making that financial commitment right now.
Coming back to the pricing of SX bandwidth - all of the carriers we have used in the past have sold us SX IP bandwidth and all of them have adopted the same pricing policy of tell us what you want to pay and we'll see if we can provide it - something we refuse to do because "back street bazaar" pricing attitudes really offend me. I really hate the 'used car salesman' approach of "let's take the sucker for everything we can" adopted by more than a few suppliers in the communications industry. It's insulting and makes my skin crawl.
These types of "sales people" seem to think we are really stupid and haven't got the sense to actually research our possible purchases which should indicate to someone with an IQ larger than their shoe size that not only would we know the cost of buying direct from SX we would also know the costs of buying direct from other cable owners. We have actually made these statements to some suppliers and have pointed out that we expect pricing that gives them a realistic profit on a service they do nothing very much to supply and to which they add no value and which is available from several other sources.
We need to make a decision over the next ten days as, if we are forced to buy direct from SX ,it will take several months to implement that link. Whatever happens we would expect to pay 40% less than we pay today for 'pure' IP bandwidth. This emphasises the point that too much of the costs of providing broadband services in Australia is 'wasted' in paying a few carriers exhorbitant sums of money for simple services that are overcharged 'because they can be".
I don't know what will happen to SX IP pricing when/if Pipe finally gets its cable operating but I can only hope that Pipe use cost plus a sensible margin pricing rather than expecting to get away with Telstra/SX Carrier pricing minus a margin.
In the mean time we would expect to reduce the costs of our broad band plans by mid 2009 but not by as much as would have once been possible. This is because IP is no longer a major cost in providing broadband services for Exetel (almost a third of IP used by Exetel's customers is cache/peering generated and that percentage continues to increase and the overwheming cost is the carrier's port charge). However we will see what becomes possible when we know what we are going to do.