news National broadband provider iiNet has published an article arguing the pay as you go quota charging system used by most Australian ISPs is fairer than the ‘unlimited’ quota models popular in regions such as the United States and Europe.
In Australia, the majority of ISPs, including Telstra, Optus, iiNet, Primus, Exetel and others, only offer broadband plans with so-called ‘quotas’. Each pricing tier comes with a certain amount of download quota per month, and customers can increase their quota by moving to a higher tier. Usually the quotas top out at around a terabyte of quota.
However, in the US and Europe, it is popular for ISPs to instead charge customers on a different basis, offering different speed tiers or other features coupled with an ‘unlimited quota’. Some Australian ISPs such as TPG and Dodo do offer such plans locally for a competitive flat rate — and they are highly popular, as they avoid any potential for users’ monthly quota to run out.
In a post on iiNet’s corporate blog last week, iiNet chief technology officer John Lindsay linked the idea of unlimited quotas to the debate raging over Internet neutrality in the US, which has seen ISPs arguing that they should be able to prioritise some types of content, such as content served from their own servers, over other types of content. Opponents of such systems have claimed it would create a “two tier” Internet in the US — where users could even be charged a premium for the faster delivery of certain types of content.
“Service providers in favour of a two-speed Internet argue that there is limited capacity on the internet and that those using the most bandwidth by delivering rich content or transferring large files should pay more,” wrote Lindsay. “In Australia, we have a different business model for the Internet. ISPs operate on a pay-as-you-go model, which also shapes the consumer market. Here, consumers can choose a plan with upload and download quotas to fit their usage and pay according to their needs – the more you use, the more you pay.”
“This is the best model for the Australian market where the majority of our traffic is from overseas, and is also the best model for all but a handful of heavy Internet users.”
Lindsay claimed that if Australia was to switch to an unlimited model for broadband consumption, just 3 percent of users would account for 50 percent of all downloads. “Quotas are designed to be an effective pay-as-you-go system to ensure users only pay for what they use and for most Australian consumers, this is the best business model for the Internet,” he added.
“Operating a quota based business model ensures we’re not responsible for policing activity online – our customers pay a fair price for the services they receive and we can focus on more important issues than where their traffic is coming from. While US providers argue about a two-tier system, our priority is to provide awesome customer service and ensure our customers enjoy a seamless experience online, whatever it is their Internet connection means to them.”
However, Lindsay’s comments were immediately criticised by one commenter, Lachlan Hunt, in a response posted on iiNet’s blog.
“This is nonsense,” wrote Hunt. “Australia’s model of capped usage limits with higher prices for higher caps, and of ISPs including yourself offering free zones where such data doesn’t count towards the monthly quota is exactly the problem that net neutrality advocates aim to deal with. It treats data from companies who choose to partner with you to get their content in the free zone as privileged compared with everyone else, and similarly with other ISPs.”
“When I was an iiNet customer, the caps were ridiculously low and the prices were too high for me to afford the next tier. Since I worked in the web development industry, I worked from home and depended on having reliable internet access. It sucked that even after just 2 or 3 weeks of careful usage, I got very close to the limit and often exceeded it and finding myself capped to unworkable speeds. I understand that the situation has improved slightly since then with higher usage caps, but still not ideal. I’ve since moved over to Europe where the fees are based on the chosen speed with no usage caps.”
“I’m really hoping that you will eventually wake up and realise that usage caps go together with non-neutral internet, and with the introduction of the NBN, which brings both higher speeds and capacities, you should be able to lower prices, abolish usage caps and offer a fair model with pricing tiers based on the chosen speeds.”
opinion/analysis
To my mind, John Lindsay is creating a false connection here between the idea of net neutrality and the idea of unlimited quota broadband. It seems relatively clear that ISPs such as Dodo and TPG, which are already offering unlimited broadband plans in Australia, are doing so without any debate at all or calls for so-called net neutrality-type systems to be introduced in Australia. If Dodo and TPG don’t see a need for such systems to be coupled with their unlimited plans, then why does iiNet’s Lindsay believe the two issues are linked?
This leads me to the question of why Lindsay is raising this issue at this time. Is it just that this issue is being debated in the United States, and Lindsay wants to debate this issue locally? Or could it be that iiNet is currently feeling the heat from these kind of ‘unlimited’ plans, and needed a counter-argument to put up publicly, in an attempt to demonstrate why its own ‘pay as you go’ plans are still fair?
It’s not really clear. But what is clear is that if pressed, most Australian broadband users would probably acknowledge that they don’t like either pay as you go plans or net neutrality systems. In an ideal world, most users would probably prefer unlimited, traffic-neutral broadband plans at a competitive price (a shocking concept, I know). Let’s hope the local market evolves that way under the NBN.
When I lived in the UK I had unlimited Internet for a quarter of what I pay now for my Internode 200GB quota plan. I expect the huge price difference is due to Telstra. Even line rental was cheaper. Looking now UK fibre (100Mbit) plans are comparable to NBN plans.
Except for the fact that the BT plans are still unlimited that is.
Australia can’t do tiered pricing plans based around speeds cause the cooper can is so screwed that they can’t give you ‘high speed’ on the higher plans, so everyone will be on a lower speed.
I suffer on a 6mbps ADSL2 connection, so would this be classed as a high speed plan or a low speed plan? :)
The only way they can extract money out of you, is to tier the data limits, cause even at crapped ADSL sync rates they can milk you for more money!
6?! High speed! That’s high speed! Low speed is 2 – 2.5 :)
haha so my 6mbps connection will be classed as a high speed tier you think? :)
LOL! I currently get 2.9 Mbps on bigpond ADSL2(?)
This is a symptom of a system that has never had proper competition in last-mile as WELL as only just emerging competition in domestic and international backhaul. The Last-Mile is self-explanatory- with practically no substantial competition in last-mile networks, the costs are fixed as to the provision of the last-mile which squeezes profit margins to begin with, making these sorts of unlimited plans difficult to start.
I don’t think I believe iinet on this one, about net-neutrality, as it’s hard to argue their and many other ISPs “Freezones” aren’t exactly that. However, Australia is unlikely to ever have an unlimited system across the board. Why? The same reason the US and even some European ISP’s are moving AWAY from Unlimited plans now- VOD sites like Netflix.
The usage increase over the past 4-5 years in the US is something like (forgive the rough estimate) 500%. Up from the normal 50% a year we see through normal growth. This is primarily from VOD sites like Hulu, Netflix, VOD and gaming via XBox and PS3 and streaming services like Rdio etc. The ISP’s are now backing OUT on both their mobile wireless “unlimited” plans (which never were unlimited anyway AND you couldn’t tether without an additional fee, something the iPhone introduced there) AND their fixed-line unlimited plans due to massive usage increases. They’re having to carry loads they didn’t expect and it’s sliced their profit margins significantly to ensure the backhaul is sufficient.
We’ve never had that problem and likely won’t in Australia for many years, because of of “capped” plans we have. Lachlan’s comment that he wants to see them come in in an NBN world is ALSO unlikely- CVC charges prevent that- The more excessive data use consumers, the proportionally higher CVC charges become as a total amount for customer costs. THIS is precisely the reason many ISP’s and the NBN public have complained about the CVC- it limits the possibility of these types of “unlimited” or very high data usage scenarios available for ISP’s to provide.
We can whine about it all we want, but the fact of the matter is, 80-90% of Australians wouldn’t even come close to their quota (this can been seen from various Telsyte Surveys) and the 10-20% that do, of them only a few percent would likely do it regularly and be willing to pay extra or suffer slower speeds other times to see that limitation disappear- hence TPG and Dodo’s Unlimited plan popularity.
Don’t forget too, TPG is a decent ISP- their purchase of the PIPE network has allows vastly reduced backhaul costs, enabling them to keep much of their profit margin while offering these plans. Dodo however, is known for its’ congestion….so its’ all very well having an “unlimited” plan….but if you can’t use it when you want, what’s the point?
So it all comes back to crap copper networks again? End of discussion.
While its crap cooper fault in a lot of ways (see above for my comment), the other issue is just bandwidth. VOD sites are bandwidth pigs. The problem in the USA is that everyone goes home and in the evenings the bandwidth requirements are massive. Everyone is surfing, youtube, facebook, gaming etc, and now add in hulu/netflix as paytv replacement products the spike in bandwidth is massive and the network struggles. Resulting in chopping video, bag lag in gaming from high ping times etc.
When you look at people who are complaining in the USA of caps, they are sucking down 200GB+ a month and more!! VOD/Hulu/netflix users are in the 1TB+ a month range!
So these ISPs are providing all the bandwidth costs etc to VOD services but not seeing any of the income relating to them! If they provide say 500GB of data to my house as part of my $39/month unlimited flat rate plan, how are they going to make money?
lower the cost of international traffic to ISP’s and we will pass it on.
i only buy a small amount compared to other ISP’s but at $32/Mbit my cost how can i offer unlimited usage to 1000’s of customers without horrid useless contention ratios.
if i could get international bw for $1-5 a Mbit (USA price) , i’d be offering unlimited plans based on speed too
@NuSkope
That’s interesting. Can I ask for a bit more information? The latest survey from analysis firm Market Clarity has the average international backhaul costs in Australia at just over $5/user as a cost total.
http://www.marketclarity.com.au/documents/market-clarity-understanding-the-trans-tasman-bb-gap-30-may-2012.pdf
Are there other factors here we’re unaware of?
BW in Sydney is much cheaper than BW in Adelaide for starters. But its all about Quantity. If i was buying 5TB/month i’d get it at a much better price than 500Mbit’s. Thats just the way it goes.
500mbits * $32 = our cost… but on 1:1 thats 5 NBN users on 1:1 (paying $150)
to ‘break even’ on 500mbit at 100Mbit speeds the contention ratio needs to be 115:1 (YUCK)
$32 is a very good price for Adelaide, Try ordering under 200mbit for anything under $40 /Mbit in Adelaide, you need to get your begging shoes on.
Government should have spent the NBN budget on laying 4 new cables internationally, lowering the cost to ISP’s by 500% so ISP’s would pass on the savings AND build new infrastructure. but thats just my opinion because thats what i do, build build build. . Some companies would just take the money . lol.
@NuSkope
115:1….I spose it depends on your operating norm.
Statistically, an ISP with, say, 10 000 customers, would use binomial distribution to work out some 32 users at once (working with an average quota of 50GB), operating at 100Mbits, at full speed, so 3200Mbits, would be the required. So that’s a contention ratio of 312:1….
Obviously, that’s pretty simplistic and not gonna happen in real life. But a contention ratio of 100:1 on international links would not be unheard of at all. Especially with cached content making up above 50% of popular content.
I agree we should’ve gone further with the NBN….but politically, that ain’t gonna happen :P
that 50% cached content is HTML only. so 50% of HTML traffic is cached , to bad html traffic only accounts for under 20% of internet usage to the end user now days.
@NuSkope
True. That’s why there’s been calls for more content provider caching. Amazon are bringing in a regional distribution node here, so we’ll be able to have access to that. And if and when Hulu/Netflix come in, hopefully they’ll allow local caching, if not build their own datacentres here.
I thought they were looking at a new international link?
The problem is that the cables between our island and the content is the killer costs. It costs roughly about $1B AUD to run a cable between Sydney and the USA, plus the cost of maintenance on this thing.
Hence they have to ramp up the costs we pay here compared to the USA, which hosts most of the internet content on local soil, what we need is a smarter internet, so information can be cached locally here, so it doesn’t need to be dragged across the ocean!
@Level380
Yes, it is significantly more expensive for international backhaul here than the US- that’d make sense seeing as we have less than 1/10th the population, we get alot of our content from overseas AND we’re in teh middle of nowhere geographically.
However, some 60% of popular content is cached in Australia by ISP’s. And we only currently use about 1/10th of our total international capacity (see my blog for more details) and the last people to try running a cable (which fell through cause the chinese were providing the resources and the US didn’t want it- see the Delimiter article on it a few days back) were costing it at under $500 Million…..so those arguments aren’t really valid :P
We DO have relatively expensive international backhaul, in world terms. But we’re a small country. What do you expect?
According to Simon Hackett (in 2009) “the most expensive part of the end to end path from the USA to your house will become that Telstra AGVC cost to move the data between two rooms in an exchange building in your capital city”. This was said near the launch of the new PIPE cable to USA. Who knows what the AGVC costs are today but I thought it puts a bit of perspective on costs.
http://forums.whirlpool.net.au/forum-replies.cfm?t=1140368&r=19363487#r19363487
“In Australia, the majority of ISPs, including Telstra, Optus, iiNet, Primus, Exetel and others, only offer broadband plans with so-called ‘quotas’. ”
iPrimus do have a unlimited plan, and Exetel have those dodgy ‘Fair Use’ plans.
Quota based internet is a sinkhole that it is nearly impossible to get out of once isp’s have started using it. In europe the ISP’s are basing their pricing on that most of their users don’t use much data and therefore they are able to carry the heavy users using a pricing scheme that only differentiates on speed not amount of data you consume.
Once some isp’s start selling a quota based system they can offer the people using only small amounts of data a cheaper price leaving the unlimited isp’s with only the data heavy users and the quota based isp’s with the light users. After a while all ISP’s will be forced into this billing model. Once this happens breaking out of it becomes nearly impossible unless all isp’s do it.
Quota based internet sounds good but in reality I fear it prevents people developing new uses for the net that eats large data amounts like movie streaming (legal, licensed ones like hulu and netflix) as in addition to paying them people have to pay more to the ISP aswell.
Its kind of like the NMB debate with some people not seeing the need for high speed internet forgetting that back in the day people did probably dont see the need for a dual lane montorway either until once they where there people stared to shift transport to them enabling much more long distance shipping for a cheaper price.
-Ivar
the one thing all “unlimited” quota plans have in common is a “fair use” policy – and fair is at the providers discretion – which if you “violate” you either get slowed down or disconnected.
if you have an unlimited plan in the us then you need to take that into account.
The other thing that unlimited plans have in common is they are capped by the speed of an ADSL2+ line. That means flat out on an optimal line 3.89TB/month is the best you can hope for. Under 2TB is more realistic.
On a 1Gbps connection you could do 10TB in a day.
Data costs money, not the speed it travels at.
I’m on ADSL 2+ and I could grab 4 TB a month if I wanted quite easily
ie Double the 2tb you mention
And would you Stevo? Would you actually grab 4TB??
I use the internet A LOT and I doubt, even watching streamed content EVERY night I could get much beyond 3-400GB….
I do wonder if it would have been good for the NBN to have supported a new cable to the USA so as to provide some competitive tension with SCX.
They’re building their own satellites so providing a comittment to buy a certain amount of internation bandwidth wouldn’t be too much different. They could have then sold this to the smaller ISPs to provide them with the chance to compete in the market.
See here:
http://delimiter.com.au/2012/08/06/broadband-quota-caps-fair-says-iinet/#comment-485200
Follow the money.
I recall Stephen Conroy stating that eliminating quotas was one of the reasons for having a NBN. I only heard it once but, I did hear it.
Honestly I’d rather quotas with defined limits rather than move back to NetStats, rolling average usage and all those other methods that the ISPs foisted on us when they were taken to task over their definition of unlimited.
For those that don’t remember those glory days, be careful what you wish for….
All of this is intensely interesting, but… I live in Darwin, where the bandwidth pipe can run extremely narrow. My personal idea of ‘heavy usage’ is 5-10 Gb download/month … but often I have been unable to get anywhere near that because all the available bandwidth goes elsewhere – presumably to the ‘unlimited’ users. (To put some numbers to this, my download speed on a nominally 2-5mbs speed has often been below dial-up speeds for months at a time. So far as I am concerned, long live quotas! Only question I ask is, why do the ISPs insist that I pay for quota that I am never likely to use?
Commenter “Lachlan Hunt” is right.
The current system does fly in the face of “net neutrality”. Just look at VOD offerings form ISPs. You can download all you want from Telstra with at no cost (cost here is data usage, which is directly translatable to a $ value based upon your usage plan), however if you want to get your VOD offering from say Playstation or Fetch you will need to pay (again, in the roundabout way of it being taken off your data usage).
iiNet is in a similar position, where only the companies they’ve partnered with are in the “free zone”. If they were truly neutral, they’d either charge for all or none.
See comment http://delimiter.com.au/2012/08/06/broadband-quota-caps-fair-says-iinet/#comment-485436
I agree with Lachlan Hunt – iinet’s Fetch TV is a quality example of missing net neutrality. Consider the cost to watch Foxtel on your xbox versus Fetch. Now I know that fetch can be delivered at little cost by iinet versus foxtel but that also gives them an enormous advantage in that consumers wallet. But that is an arguement against freezone as it disrupts free market ideologies, not tiered pricing. Even still, freezone is enabling iinet to innovate, so it’s pro’s and cons.
I’ve worked in the Industry, I favour tiered pricing. Remember that the bottom $30+ dollars of just about every connection goes to Telstra so in reality, we are talking about Nan & Pop getting email for $5 per month, and your cousin Juarez can come and stay for as long as he likes for $50 a month. Do i want to force Nan & pop to spend another $25 per month so little johnny can download his dvdrips for $20pm less? SO i agree with Mr Lindsay, it is fairer when the costs are as they are.
Why are the costs different? Peering between ISP’s in the states is virtually free, so the cost is whatever it costs to build the network. ISP’s share traffic with each other to reduce costs, their cost is really only the infrastructure between them. You can see how eat all you can internet grew from that. Our internet is dominated by having to pay for peering by the mb, so you can see how we want to charge the more expensive customers. it’s horses for courses, Australia is a different course.
Neil you clearly have no idea what Net neutrality is, go read over this page http://en.wikipedia.org/wiki/Network_neutrality
To sum it up for you, Net Neutrality prevents Internet providers from blocking, speeding up or slowing down Web content based on its source, ownership or destination….
iiNet or Foxtel are not blocking/slowing/anything. All they are doing is providing some internet content to the user so it doesn’t do against their data plan.
Net Neutrality came about cause of the unlimited data plans in the USA, the ISP wanted to ‘slow’ users down who are doing heavy traffic bandwidth to reduce costs to them, unless of course they paid for those services etc or places like hulu gave a cut back to the ISP.
Transferring data is what costs on a network. Unfortunately if you provided unlimited quotas, too many people will simply download purely because they can, not because they need it. This is commonly referred to as the tragedy of the commons.
Should the majority pay so that 3% can consume 50% of all data downloaded?
I would much prefer an NBN without the artificial speed tiers and quotas.
Six months ago I moved to Qatar from Melbourne, where I used IINET on an ADSL2+ link.
I’d monitor my quota and make sure I planned in advance my usage, what I’d downlaod when, and specifically schedule thigns for off peak hours.
On my nice shiny FTTP link here in Qatar I have no quota, and can download what I want when I want. My TV watching is migrated to HD, because “I can”. VOD – certainly. No planning, no care, just use, use use.
Of course, the fact that I suffer bufefring, drop outs, traffic congestion at peak hours – well that;s because everyone else does exactly the same thing – at exactly the same time.
Make no mistake – unlimited plans do change your behaviour, and they do have an impact on wider network utilisation at peak times.
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