John Linton
.........not for the faint hearted or companies without access to major customer connectivity bandwidth (let alone large amounts of IP at minimal costs.
We are getting close to determining what we can sensibly offer in terms of unlimited use plans and have come to the conclusion that we can offer them to around 90% of our current customers (though we think less than 5% of those customers at the most will want them) but we have almost no, sensible, way of offering them to new users.
There is a simple barrier to Exetel providing unlimited downloads - each gbyte downloaded has a cost to the supplier and the more gbytes downloaded the higher the cost of the service and the sort of customers who would want this service, almost certainly, are the sort of customers no ISP would want to have. In the case of an ISP providing ADSL2 services to an end user there are the following costs:
1) Monthly port cost
2) Per gb cost of 'downloads' delivered to the end user from their exchange to Exetel
3) Per gb cost of IP 'retrieved' from the www
4) Overhead of running the company each month
5) Depreciation of the equipment used to deliver the service each month.
I guess all of that is obvious to anyone who uses ADSL.
The concept of user pays has never been successfully used in supplying ISP services in Australia where the overwhelmingly used plan concept has
been $N for n gb where the ISP offers a plan with an attractive usage number of gb but bases the price on a much lower number of gbs actually
used by the total number of users on each plan. So while the plan may say it includes 20 gb the ISP actually bases the price of the plan on
what they expect the average usage to be - usually much less than 50% of the stated plan download inclusion....in many cases less than 25% of
headline inclusion.This principle works well and has been the basis for broad band plans from the beginning as far as I can
tell/remember and the methodology provides a 'marketing' appeal that allows 80% plus users on any plan to subsidise the use of the other less than 20%.
And that's the key issue in providing Unlimited plans. By definition - Unlimited plans are impossible to offer with any expectation of making a profit. The conventional wisdom dictates that the only people who will use unlimited plans are those people who will use so much (irrespective of whether they actually use what they download or not) that no 'upstream/conduit resource' will ever be enough to deliver an unlimited service.
So why are AAPT already offering such a plan and why is TPG saying they will offer such a plan? My guess:
AAPT are offering an unlimited plan because they have an Australia wide network with significant capacity that they put in place to service mainly 9 - 5
business customers which has almost zero usage outside those week day times. They also have a parent that owns 50% of the SCCC which means
they also have access to a huge amount of unlimited trans Pacific cable.So they have a theoretical 'zero cost' of traffic (if the bean counters allow that scenario) and can, at least up to some unknown point discount those costs to anything they wish to do - until they have used up all of that resource.
TPG needs to emulate AAPT because the AAPT unlimited offer is directly aimed at TPG's major user base - large down loaders to whom the word large means incredibly large - many hundreds of gbs per month. TPG's purchase of Pipe is meant to provide the same advantage that AAPT enjoys in terms of 'no cost' international IP with their ability to provision the back hauls from their DSLAMs similarly inexpensively. Without knowing anything about the TPG network I can only assume this is true.
Irrespective of the truth or otherwise of the above statements, one thing is for sure - there is unlikely to be room in the relatively small 'unlimited user' marketplace for two providers which means that whatever prices for unlimited plans exists now will be reduced by both companies as the
'dust settles'.
Exetel has little to no ability to compete in that sort of price war and has no intention of doing so.
So, what we will most likely offer in terms of unlimited is likely to be based on these premises:
1) We will offer unlimited ADSL2 (only) to Exetel customers who have been with us for more than 12 months and whom have good payment records.
2) Any unlimited plan will require a new 12 month contract - no exceptions
3) The offer will be 'by invitation' which means an unlimited plan option will be made available in the change plan facilities in the Exetel User Facilities.
4) The plans will be made available in early April with the earliest activation date being May 1st 2010.
5) Likely pricing will be $80.00 per month - perhaps a little less.
If we can reduce our IP and customer connectivity costs enough (which by yesterday we had failed to do) we could do this at little or no cost and make a small profit per user (on average) but only by offering such plans to our own users. However that is a useful thing to be able to do for between 5% and at the most 10% of our user base - it allows them to stay with Exetel rather than being attracted to TPG or AAPT.
However, what the new pricing we think we can achieve will do for us is allow us to 'improve' the plans for people who don't download 100s of gigabytes per month and want to do that for 'nothing'. We will complete our bandwidth contract negotiations before the end of March (I had hoped we would have done it by yesterday but that proved too hard) and I am away from Australia for the whole of next week so can't sensibly participate in any initiatives. I will give it some considerable thought over the next 7 days so that we meet our April 1st deadline.
PS: An interesting comment on another aspect of Krudd's Folly:
http://www.theaustralian.com.au/business/cable-chief-mike-fries-queries-nbn-cost/story-e6frg8zx-1225842995220