opinion When Exetel chief John Linton (pictured) this week revealed the ISP’s projected National Broadband Network pricing for Tasmania, my first thought was: “Is this for real?”
After all, the company is expecting to offer 25Mbps fibre connections for zero dollars a month, with downloads being charged at $1 per gigabyte.
That’s the sort of pricing that most people would think was complete insanity. If there was no minimum download limit, you might get quite a few people signing up for 5GB monthly plans, and only paying $5 for the privilege. You could fund that amount per month by skipping one McDonald’s happy meal.
As Penny Arcade might say, expecting such broadband plans to actually make a profit is more insane than expecting a magical cloud of fairies — each with a tiny picnic basket — to fly gold coins from the great Telstra treasure cave on Mount Doom to John Linton’s personal bank account. When you live in a world of fantasy, after all, anything is possible.
However, as we’ve previously noted, John Linton is not (that) crazy. And in fact, if you examine the logic behind Exetel’s NBN pricing plans, you’ll find they actually make a strange kind of sense.
As Linton pointed out this week, the implementation of the NBN will reset Australia’s telecommunications industry. Over more than a decade, Telstra’s wholesale broadband pricing structures and backhaul costs have shaped the industry’s pricing plans until they are what they are today: Complicated and unwieldy.
The onset of the NBN gives ISPs a chance to re-examine that structure outside of the bounds of commercial agreements with Telstra. The only factors they need to consider are what pricing models will allow them to make an acceptable return on their money relative to NBN Co’s wholesale rates, and what their competitors are doing.
In other word, NBN Co is about to fire the starting pistol on the biggest landgrab for broadband customers that Australia has ever seen.
John Linton knows this. And so far it appears he is the only one in Australia’s ISP industry.
When it came out with its own NBN pricing plans for Tasmania, national broadband player iiNet — which is an order of magnitude bigger than Exetel — appeared to have barely given any thought at all to the onset of change. Instead, it simply took its existing fibre plans from estates in Victoria and slapped an “NBN” label on them.
Linton knows this — it’s why he came out this week with his own, radically different, plans. His intention is to attract customer attention to his own business and steal a large swathe of customers in Tasmania. And of course it’s good publicity for a smaller player like Exetel to stick it to the man in the person of the larger ISPs like iiNet and Primus that have grown fatter and lazier over the years (although nowhere near as fat and lazy as Telstra and Optus).
Linton is also prepared to say in public what so few other heads of ISPs are — that he is tired of subsidising leechers — those who use their broadband to download dozens of gigabytes of movies, TV shows and video games each month.
As the Exetel chief said this week, it’s the light downloaders — those who only consume a few gigabytes of data each month — that are subsidising the torrenters. And it doesn’t seem like he cares if light downloaders are all he attracts to the Exetel NBN services in Tasmania. Why should he? These are the customers who are making profits for his company, after all.
When you stack up Exetel’s NBN plans for heavy downloaders against iiNet’s, they start to look pretty woeful — and iiNet’s own high-speed plans were already pretty poor, in my opinion, with users to be charged $129.95 per month if they want the full 100Mbps speeds promised by the NBN’s fibre.
The wild card in all of this is Internode. I don’t expect iiNet or Primus to come out with remarkable NBN plans in Tasmania, but the Simon Hackett mothership has been notoriously favourable to heavy downloaders and early technology adopters in the past while still maintaining solid plans for the mainstream.
Internode so far appears to be following iiNet’s lead, but I’d like to see Hackett and crew come out with some really competitive NBN plans in Tasmania over the next couple of months — plans which are geared to offering 100Mbps speeds with a high download quota. The company should be able to bolt on other services such as its NodePhone internet telephony offering to make a modest profit and just break even on the broadband pricing itself.
If Internode followed this strategy, we could end up with a Tasmanian NBN market dominated by it at the high end and Exetel at the low end. With iiNet’s existing presence in mainstream Tasmania through its Netspace acquisition, this would create a nicely structured market with enough service differentiation.
Let the games begin.
Image credit: Delimiter
Rumor is that NBN is giving out free tails as part of the Tasmanian trial. Which would allow Exetel to safely experiment with this style of pricing.
Good on them to trying to shake things up a bit.
That is interesting Craig — would really allow Exetel to go wild. It does beg the question, though, of why iiNet and Internode’s pricing is not that great.
If you go hard now in pricing like that, you make future pricing expectation issues that will hurt you badly when the trial pricing reverts to whatever the real per tail price is.
Just imagine the level of butt hurt on whingepool….
Heh quite possibly, but in the meantime you will have garnered a lot of customers and revenue … I guess you can bundle on value-added services like IPTV or VoIP later on.
It should be noted that Exetel’s pricing is “out” here: http://www.exetel.com.au/residential-fibre-pricing.php
Internode’s pricing is more or less available as well as they have indicated they intend to take their new FTTH pricing from the Opticomm estates & use it for Tassie at least. I am hoping they tweak it a bit more- while I understand the rationale behind counting uploads on a service that can have up to 16Mb upstream, I don’t think they increased the quota’s enough to justify that. We’ll see :)
and that, as usual, Exetel has not quite hit what John Linton was suggesting. He usually makes “suggestions” via his blog of new services & pricing that don’t quite materialise. Read back over his previous announcements- its a clear pattern.
Having said that, the pricing is pretty good. I think the Opticomm pricing is the most interesting, as it can a) be compared to other offerings & b) is a more likely indicator of where the pricing will end up. I do wonder about the upload speeds however, has he just got them wrong on that page or are they offering lower upload speed then any other Opticomm reseller?
Is that actually NBN pricing Bryn, or pricing for Aurora’s previous fibre trial? It looks to be more expensive than what Linton said this week. It doesn’t mention ‘NBN’, either.
Personally, I really do not see the value in comparing Opticomm pricing to NBN pricing — they are completely separate offerings and projects and should be treated as such. Opticomm is not a $43 billion Government project.
Its interesting that, when that page appeared, its said “via NBNco” and now it says “via Aurora Energy”. It’s new pricing & I don’t believe the previous Aurora rials were open access so I’m pretty sure that pricing is NBNco tassie trial pricing.
The reason its more expensive is because thats how John Linton does things, muse about one thing and then not quite deliver it. His reply to someone commenting on that on his blog was something like “sometimes things fail to materialise”.
In terms of comparing Opticomm to NBN pricing…tassie NBN trials are being run in conjunction with Opticomm & over time I think we’ll see price harmonisation between them.
Well basically there is no such thing as “NBN Tasmania”. It’s just a cobbled together show for the fans with Aurora basically doing all the work.
I agree with you about Linton, a lot of it is hype, but, but at least it’s interesting hype.
Again, why should the NBN stuff be compared to Opticomm? They are in no way comparable, in scale, ownership, function, aims, etc. Completely different.
Aurora & Opticomm doing the work :). I believe they used lots of Opticomm’s B2B processes.
NBN & Opticomm shouldn’t perhaps be compared but they will be because they supply the same thing. Even the now-old telstra-based ADSL vs competitor-based ADSL2+ generates “confusion” and question from consumers not understanding why they should “pay more for less” when they can’t get ADSL2+.
Because of this, I suspect those prices will even out in the long run & that if the NBN proceeds as planned retail pricing will be consistent across Opticomm & NBN tails.
I must be thick. I don’t understand how my heavy use of broadband “subsidises” lighter users. I pay for a plan, just like they do. How we use it is up to us. Why should I be castigated or even penalised for using it to it’s full potential?
hey sunny, I think the argument goes something like — the cost of the data backhaul to pay for the heavy users means that ISPs don’t really get their money back for the quotas they are providing. Whereas, most ‘light’ users don’t use all of their data in any given month, but they still pay for it, so the ISP makes extra profit on the data that the light users paid for but didn’t use.
I hope this makes sense 8)
For what it’s worth, I agree with you ;)
thanks Renai, I suppose it does, in a corporate make-money-at-all-costs-and-never-mind-what-the-customer-really-wants kind of way.
Thing is, they impliy that heavy users must be doing something wrong and are therefore bad customers. Afterall, I pay for 130GB, how dare I use all that up on a consistant basis so they don’t make a nice profit; I must be doing something illegal.
I have a game-playing husband, a game-playing son, and a youtube/stagevu-watching daughter. Not counting what I use, which is also considerable, we max out our account regularly. With four people in games, browsers, email, and chat, it adds up.
That’s one good thing about the US: no download caps.
John Linton has never hidden the fact that if you are a heavy downloader and costing them money/cutting into there profits because of heavy downloading they’ll ask/force you to leave Exetel and find another ISP to use.
Ok, so he wants people to use his service, just so long as they don’t actually use his service.
Gotcha.
Note to self: never use Exetel.
I completely agree with you sunny — that’s why I always recommend either iiNet (which I use) or Internode, as they both have technically good services at not too bad a price. Or, for an elderly customer, Westnet, because they are the best at customer service.
Personally, I do not recommend Exetel, because although they do have good plans and are quite good technically, they do not seem to have had good customer service in the past — although, according to John Linton’s blog postings and newsletters, this may be changing.
the question is what prices optus will give.. that’s what’ll be the difference between me staying on adsl2+ or hell even leaving optus after 12 long years to give something better a try, and going over to the nbn
you realise this article is one year old?
oops lol! i do now
yea, John Linton has a few more gray hairs now than he shows in that photo ;)
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