Opinion on broadband data caps in New Zealand
Long discussion on Twitter involving @PaulBrislen, @SteveBiddle and @plambrechtsen. I will summarise my view on this:
- I don't like data caps either.
- Data cap is a symptom. They are not the problem.
- Find the root cause to fix the problem then data caps go away.
Data caps will disappear when the roadblock is removed. What do you think is the problem?
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Comment by Ian, on 21-Feb-2012 09:13
You're totally correct. All the talk about data caps and speeds while ignoring the elephant in the room is frustrating me.
The number one issue hindering NZ broadband is a monopoly on international traffic.
We can rabbit on about UFB all we want - fact remains I get a good speed from home on ADSL2 (tested last night and I get a solid 15mbps to NZ or Sydney), but ultimately I'm constrained because it's too expensive to use the Southern Cross Cable. Bring on Pacific Fibre.
As a side note, we're stuck with caps. Every time an ISP tries having an uncapped plan they end up with a massive proportion of the leechers. If all ISPs uncapped everyone we might see a 30GB/user average. If just one ISP does it I imagine the average for them is well over 100GB/user. The only way we're going to see uncapped become a reality (sweet deals on Pacific Fibre aside) is if all ISPs do it at the same time to ensure an even distribution of leechers.
Comment by Kit, on 21-Feb-2012 09:17
One of the contributing factors is the backhaul arrangements with Chorus - with a maximum of 100kbps/connection, if content suddenly became available (thus increased uptake), and caps were removed, 7PM would become a whole lot of slow!
It would be very interesting to find out why a better tool (rather than a blunt one) has not been developed or deployed in the Chorus network.
Comment by Ian, on 21-Feb-2012 09:22
I can see the cost of international traffic being a reason for wanting to limit data usage.
What I'd like to know is why can't domestic (within NZ) traffic be zero rated? It was on early ADSL plans. If you only want to view content hosted in NZ or shift data within NZ, does it cost more/ the same than from overseas?
Comment by Publius, on 21-Feb-2012 11:39
The reason for datacaps is primarily to make a series of more expensive "products" to sell.
If you broke down an ISPs costs per customers, the cost of wholesale bandwidth would be a small fraction of the helpdesk, general staff costs, buildings, advertising, etc.
ISPs buy their bandwidth in Mbps not MB. ComCom should require ISPs to move to a model where users are charged different $/MB over the course of the day, like electricity is cheaper at night.
So have a line charge for having broadband (like gas electricity)
Then $/MB during peak times
Outside that 0.3x/$/MB
No capping! Electricity or gas companies don't moan to you about their wholesale costs because they are making profitable margin on the unit costs. Just pass the costs along.
Obviously there are medium-term infrastructure costs but they are dealt with in the line charge not unit costs.
Xnet is the closest to this I have seen for the home market, but still not real cheap.
Flat connection $39/mth
Usage $1.28/GByte No cap. If there was more competition this would be cheaper.
Comment by codyc1515, on 21-Feb-2012 12:02
ISPs should change their business model a little from the old way of GB to Mbps. e.g. $10/Mbp vs. $10/10 GB.
Comment by Chris, on 21-Feb-2012 12:59
Well Fry first said how slow it was uploading. Plus Telecom has far lower data caps at a higher price than competitors using the same lines.
Comment by Ian, on 21-Feb-2012 13:23
@codyc1515: That'd be great for leechers, but awful for regular users. Some months I use as little as 10GB, but at least when I want it, it's fast! (15mbps+). The cost for an uncapped 15mbps (potentially 5TB of data moved) would be comparatively astronomical. I'd end up paying for 2mbps and waiting all week for Facebook to load.
Comment by Chris Wiggins, on 21-Feb-2012 13:25
Ian: Reason data in NZ isn't zero-rated is because the big players don't peer properly. If everyone was on the APE/WIX etc and followed peering like what used to happen, zero-rated national traffic would be easy. Most of the time if I want to go from my Telecom connection to almost any other ISP you'll see the trace route goes out of the COUNTRY!
ISPs need to work together better before we see any cap removal. That and the transit out of this little island in the middle of the Pacific.
Comment by Bruce Hoult, on 21-Feb-2012 17:02
Desirable characteristics of internet connections:
1) high bitrate
2) low fixed cost
3) zero marginal cost
4) T&Cs that permit you run run "servers" or share your connection
Pick any three.
On Telstra cable I've got 1, 2, and 4.
Modern dial up tends to be 2, 3 and 4.
NZ broadband with a cap is 1, 3, and possibly 4 (should be, but not always)
Broadband in the USA tends to be 1, 2, and 3.
It doesn't make economic sense for anyone to offer 1,2,3 and 4 together. They would have exactly one $50 customer, who would on-sell to the rest of the world. And then they would be bankrupt.
Comment by insane, on 21-Feb-2012 22:47
The few who harp on about international traffic costs being the reason for data caps couldn't be farther from the truth. ISPs make a nice profit on selling data/bandwidth and would love to sell as much of it as is physically possible.
However so far only 'kit' above has touched on the real issue, and that is that ISPs who rely on Chorus wholesale DSL ports are constrained to a fixed amount of backhaul based on the number of broadband customers they have. It's straight forward maths x customer multiplied by y bandwidth allocation per user = total aggregate available DSL backhaul. And there is no option to simple buy more than 100kbps per user when you reach that.
So no matter how much national or international transit those ISPs purchases, they won't be able to deliver it to their users via Chorus if they have filled their backhaul allocation with internet leaches, which equates to an average of only about 45GB per user per month.
Currently the ISPs which are able to offer larger data caps are those (eg slingshot, orcon ) who have their own equipment in some exchanges and therefore control some of their own backhaul.
Comment by Foo, on 22-Feb-2012 11:27
Does this mean that the solution (or one of them) is for more ISPs to get more of their equipment into exchanges?
Can ISPs not increase their backhaul allocation?
Comment by Kit, on 22-Feb-2012 12:03
The backhaul allocation can be increased, currently to a maximum of 100kbps/connection, and it's quite expensive if you have lots of customers at the other end of the country to your handover. This could be a barrier to an ISP such as Snap, if they don't have an Auckland handover, but gain popularity in Auckland, their costs will increase, but perhaps not to the point where it's not economical to invest in another handover.
Requiring significant hardware investment into exchanges/cabinets is a major barrier to competition from new entrants, I'm not keen to see ISPs go the way of mobile operaters - 3 big ones, 0 small ones, closed and unprofitable wholesale agreements.
Although the nitty gritty is still being worked out, I fully support the Chorus/Telecom split in theory, especially the part where it's meant to be hopefully non-discriminatory access to the Chorus copper network.
Comment by Steve, on 22-Feb-2012 14:48
I DON'T SEE THE PROBLEM. CAPS CAN BE SWITCHED OFF WITH THE 'CAPS LOCK' KEY ON YOUR KEYBOARD. see?
Comment by Morph, on 23-Feb-2012 01:06
Pay More get more. NZ doesn't have the easy connectable client base nor people wanting to pay the $$ People that say for NZ $35 a month for unlimited in the US .. GREAT! But its most likely crap and because there are 300+ MILLION in the states thats how they can make more bang for buck per customer.
Comment by Bob, on 23-Feb-2012 12:07
I see broadband as a utility, like electricity, water. There's no cap, you pay for what you use, so why not have the same model for broadband? Here's one possible answer:
You'd get people (particularly those with kids) getting huge bills, just like when the kids turn on large heaters and leave them on. We don't complain to the electric company when that happens, because we (the public) now understand the connection between some appliances and the size of our bill. So caps are a useful thing in those instances, they stop you getting a huge bill unexpectedly. Until the general public gains that same level of knowledge with the type of data they consume, they're going to be unpleasantly surprised when their bill drops through the door.
Comment by Bluetoothkiwi, on 24-Feb-2012 07:44
Well,
Great comments from lots of you - but with a family of two adults and four children and 9 Internet connected devices and TV's including two iPad2's, we chew through the 75GB allowance by around the third week, and pay per GB for the final week.
This is despite the fact that no one in the family frequent download sites with pirated games or videos.
I find the biggest users of data tend to be streaming media (TV3 and TVNZ on demand and YouTube) followed by iPAD (IOS updates / apps) followed by online gaming (maps / DLC's).
I estimate 200GB to be ideal for our family - but none of the providers offer 200GB cap.
What is the root cause of the problem? There is a misalignment of what Teleco considers reasonable use for a modern connected family and the reality!
Comment by insane, on 25-Feb-2012 22:20
@ Bluetoothkiwi, I suspect perhaps it's only your ISP which doesn't offer plans greater than 75GB, as virtually all do.
They may not have a 200GB plan listed as such on their website, however they most likely offer it as additional block of data which you can purchase at a discounted rate compared to the casual over charge per GB.
Some providers are even offering unlimited plans, an options for those who never want to have to deal with worrying about data caps.
Back to the backhaul restrictions though, I find it amazing that Chorus don't even offer > 100kbps per user for BUBA. I'm not going to talk about EUBA0 as chorus have indicated they plan to also place limits on this too in the near future.
Orcon/Slingshot/Compass/Telstraclear would do well for themselves if they created their own wholesale product using their LLU equipment to rival Chorus.
Comment by Simon, on 27-Feb-2012 14:57
@insane Vodafone wholesale their LLU network to Slingshot so this is already happening.
Comment by mfrater, on 28-Feb-2012 13:07
The root cause of datacaps has been cost. Unlimited data means ISPs have to buy fatter IPtransit links. Where is the upside for the ISP?
Sure, IPtransit costs have been dropping at about 30% per year for at least the last decade, but demand is forecasted to grow 100% a year. (source-Cisco ICT Ecosystem survey - NZ consumed 14 petabytes per month in 2010 -forecasted to grow to 73 petabytes by 2015)
So rather than looking for the root cause, look for the catalyst. The same thing happened with dial-up when IHUG launched unlimited plans. The catalyst then was revenue from the dial-up calls. Once IHUG jumped, all the others we forced to jump to, and the market changed for ever.
ISPs could offer unlimited plans now as landgrabs, but these are not sustainable in the long term unless:
1) cost of IPtransit reduces at the same or faster rate than increase in download demand.
2) ISPs get to "clip the ticket" on some of the content that is downloaded.
3) the plans are adopted by the mass market which will reduce the average GB/customer over time.
Maybe this is starting already. Compass and Callplus both offer unlimited plans now!
p.s. Mauricio, I don't agree with your free-loading comment above. All parties that peer at APE/WIX now provide free national carriage to the parties that the peer with. Telecom and TelstraClear are no different. They have just decided that they can make more money from not peering, purely because of their market share.
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Comment by Liviu Sas, on 21-Feb-2012 09:11
I think datacaps will disappear only when the bandwidth will be unlimited. Till then I would like to see more "generous" datacaps. I would say something like 300GB for a household would be a good start to encourage telecommuting and online streaming.
For NZ, the biggest roadblock is the international bandwidth.