John Linton
..........in providing ADSL2 to current and future Exetel customers.
At the current pricing of the AAPT unlimited offer of $99.99 and the promised pricing by TPG of something less than that the appeal of this sort of unlimited service remains constrained to something like (and I have no real way of knowing) 10% of the total ADSL user base in Australia - some 600,000 (more probably much less than 500,000) current users. A sizable market but not something that many ISPs are involved in and a problematic demographic in that 'heavy usage' is much more difficult to manage than lower usage. This demographic is also constrained by the fact that the total available market of 6 million ADSL users is constrained by the actual number of exchanges that either AAPT or TPG have ADSL2 DSLAMs installed at.
AAPT's obfuscatory pricing (shown at the bottom of this page:
http://www.aapt.com.au/services/personal-small-business/personal/legal-unlimited-24/7-adsl2
is, even after reading back and forth a few times not clear to me whether the service is $A100.00 per month or $A110.00 per month. Whatever it is it is priced way out of reach over 90% plus of Australian users and is not going to make much of an impression except on the sort of user who downloads more than 150 gb per month - I wonder just how many of such users pay their own internet bills? So I think the AAPT offer is unimportant at this time though as it will decrease over the coming months it will become more important.
TPG's possible $A75.00 (internet only) unlimited plan seems more attractive than AAPT's $A100.00 unlimited plan except the AAPT plan includes phone line rental and TPG's plan doesn't seem to do that - add $A25 - $A30 for a telephone line and.....except that TPG is offering an $11.00 per month (inc $10.00 worth of calls) quasi telephone option via the old Comindico network POIs which is a plus but not clear whether the end user still has to have a Telstra line and what charges TPG will make for telephone calls - all that will become clearer soon - again at $A86.00 per month - not all that exciting to very many users and the detail may be even less so.
So....not really much to worry about today....we will lose some high end users which will be a profit neutral or profit plus situation for us so it doesn't really matter. However things won't remain the same and it can be argued that today is just the start of a wider adoption of such offerings by more ISPs as the pricing of IP has fallen so much so quickly and if TPG's bid for Pipe is voted for at today's shareholder meeting TPG will have some interesting numbers to 'crunch'.
But what about 'tomorrow'?
Exetel would expect to more than halve our current buy prices for IP over the coming months from a mixture of $A125, $A90, $30 (Peerap generated IP) and 'Zero' (Akamai and Peering generated IP) per mbps which gives us a 'blended' cost of sub $100.00 per mbps. If we are successful in the current negotiations this would give us an effective $A35.00 per mbps or an effective per customer gbyte of around 16 cents (ex gst) compared to over 40 cents we pay today. That cost is attractive in yesterday's ISP land but not particularly attractive today and certainly nowhere near good enough moving it to calendar 2011 if the current uncertainties in the residential market places persist.
Our major problems remain, as they have always been, the very high prices we pay for ADSL ports and, in the context of the ever downward moving prices of IP - the ludicrously expensive back haul charges we pay. Unless we can reduce port monthly charges by 25% and back haul by 50% IP could be free and we couldn't compete in 'tomorrow's' ADSL2 residential marketplaces. The lower IP costs will help us over the coming 4 - 5 months but almost certainly not beyond that. Whether we can find a realistic supplier of DSLAM ports and sensibly priced back haul is doubtful but slightly more promising than it has been over the past few years.
If, and it's a big if, we are successful in our current 'negotiations' we could establish three simple ADSL2 plans along the lines of:
1) ADSL2 (plus telephone line) - $50.00 per month - downloads/uploads @ 50 cents per gb - capped at $A75.00 per month
2) ADSL2 (byo line) - $30.00 per month - downloads/uploads @50 cents per gb - capped at $60.00 per month
3) ADSL2 (naked) - $45.00 per month - download/uploads @ 50 cents per gb - capped at $70.00 per month
We are close on two of the elements and a bit too far away on the third element at the moment to make this a 'sure thing' but if we don't succeed in making something like this happen then I'm pretty sure someone else will in the not too distant future.
PS: Despite Ludlam's personal lack of knowledge maybe the greens won't rot in hell after all:
http://www.smh.com.au/business/telstra-gets-a-break-in-fight-for-its-future-20100311-q1o9.html