By the numbers: fast, cheap and subsidy free

By the numbers: fast, cheap and subsidy free

Summary: When scanning the globe to see what country is offering the best, fastest and cheapest fibre broadband plans, it looks like you can't go past Hong Kong. Could competition deliver the same value in our major cities?

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TOPICS: Broadband, Telcos, NBN
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When scanning the globe to see what country is offering the best, fastest and cheapest fibre broadband plans, it looks like you can't go past Hong Kong. Could competition deliver the same value in our major cities?

City Telecom's Hong Kong Broadband Network now boasts 1Gbps broadband speeds with unlimited downloads, priced at just US$26 per month. A few months ago, it had more than 600,000 subscribers connected at speeds of over 100Mbps. And it did it without any government subsidy. By comparison, here in Australia, iiNet is selling 100Mbps on the government-funded NBN, with download limits, for almost three times the price ($80).

Of course, Hong Kong has lots of people crammed into a small area — 6480 people per square kilometre, three times the density of Sydney and four times that of Melbourne.

The UK (where high-rise living isn't common) provides another interesting comparison. Over there, BT was structurally separated, and their network division has been rolling out fibre with some government subsidy. Both BT and Virgin are offering fibre connections at 100Mbps for £35 ($53). Adjusted for purchase power parity (to reflect the cost of living), it works out that we're still paying well over what the poms pay.

Not only are we expensive, we're also slow to get it. Years of protestations about who will build the infrastructure has also slowed us down. Meanwhile, in North America, almost 8 million homes are already connected to fibre, with 22 million homes passed. Prices are high for the vanilla service, but TV bundles for not much more are almost certainly helping uptake. We convinced ourselves that we were front runners on fibre a few years ago, but we were all talk. Now, it seems, we're quickly slipping behind the rest of the world.

This table shows the best prices that we found (you might do better) from major providers in various countries around the world. Whichever way you look at it, the NBN is providing an expensive solution. The US is the most expensive, except when we look at lower speeds — you still pay a premium for higher speeds over there.

(Credit: Phil Dobbie/ZDNet Australia)

What makes Australia unique, of course, is our attempt to drive fibre out to 93 per cent of the country. It's a noble aim, but it comes at a cost, with the cross subsidisation of those regional areas pushing up prices to major metropolitan areas. International comparisons seem to suggest that the level of that cross subsidisation could be extremely high.

The alternative approach is to allow competitive build in metropolitan areas, and only subsidise areas that are not contestable. We'd hope that would get fibre prices in our cities to something comparable with the rest of the world. To achieve the same price outside the cities would mean a far higher level of subsidy, of course, but at least the price would be transparent. The argument would switch from "Do we need an NBN?" to "Do we need an NBN everywhere?"

Instead, we seem to be aiming for a uniform pricing across Australia. If the argument is that the NBN will make us internationally competitive, shouldn't we be aiming for prices that match the rest of the world, at least in some parts of Australia?

Updated at 2:57pm, 9 January 2012: corrected the price for iiNet's NBN plans (thanks Paranoid) and removed reference to Bell Canada's 100Mbps plan, given the company's fastest plan is 30Mbps (thanks sjl and Catherine).

Topics: Broadband, Telcos, NBN

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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37 comments
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  • You are using the wrong numbers in your table. The $129.95 per month is not the NBN plan pricing. You've gotten your numbers from here http://www.iinet.net.au/fibre/plans.html Which are NOT NBN plans.

    iinets NBN plans are here: http://www.iinet.net.au/nbn/nbn-plan-residential.html

    Same speed and almost double the quota of the plan you've shown for $50 per month cheaper. Please change this article.
    Paranoid-beb39
    • You expect accuracy from an article this slanted?
      What the article doesn't address with its legitimate question is that NO ONE is WILLING to build new networks except telstra and they won't share. AND history has shown they will charge first borns and kidneys for access.
      idryss
    • It would appear he actually does recognise that $130 isnt the NBN number... since he lists an even more innaccurate number ($160) for iiNet's NBN in the first paragraph.

      I also like the little bait and switch where he talks about population density of Hong Kong compared to Melbourne or Sydney, and then mentions "the UK (where high rise living isnt common)" as though that mens the population density is more comparable... except of course if we do the comparison in the same way, London has a population density of 4978: 2.4 times that of Sydney and 3 times that of Melbourne.

      It also says that $160 is "almost 7 times the price" of $26, when it is either 6.1 or 6.4 depending on whether you account for exchange rate.

      And then we're expected to trust him to be able to calculate purchase power parity?

      It seems like pretty much every point made in the article is based on bad facts or bad math.
      Caffiene-c74e7
      • I agree, however he is leading readers to believe that the table is showing NBN pricing.

        "This table shows the best prices that we found (you might do better) from major providers in various countries around the world. Whichever way you look at it, the NBN is providing an expensive solution. "

        The $160 price he said is also on the page I pointed out in my first comment, it is Fibre 7. 100/40, 180GB data for 159.95.
        Paranoid-beb39
        • Well, we can expand a little bit, then, if we want a comparison that covers the same proportion of the population.

          (Disclaimer: Wikipedia based statistics)
          Sydney and Melbourne cover about 38% of Australia's population. The equivalent population for the UK would be 23,660,000. If we look at UK conurban areas this equivalent population can be found with a minimum (not average; minimum) density of over 3800.

          In other words, the equivalent population in the UK has a population density 1.84 times that of Sydney, while iiNets $70 plan is only 1.32 times the price you list for BT and Virgin.

          The difference in urban population density is still significantly greater than the difference in price. It certainly looks far from clear that iiNet's plan is an unreasonable price based on the comparison.
          Caffiene-c74e7
          • Oops. Replied to the wrong post. That should be re Phil's point about London being 13% of the UK, obviously.
            Caffiene-c74e7
      • Caffiene,
        Let's remember London accounts for just 13% of the UK population. Most of the population live in smaller cities and country areas. Australia is one of the most urbanised countries in the world.
        phildobbie
        • You're kidding me right?
          Great Britain covers an area of 229,848km2, whereas Australia covers 7,617,930km2. Now I know you'll say that most live in urbanised areas but just to connect these urban areas with the infrastructure required is an enormous feat. Although we may be urbanised we still have a population density far less that Great Britain, Hong Kong or any other country. Add on the fact that the population of GB is over 60mil which is close to three times our population in an area smaller than than 1/3 of New South Wales!

          It is ridiculous to do comparisons with other countries that are building broadband networks because each country is unique. Not only in population density, size, country area, but also cost of living, needs and uses of the network.
          This article is so ridiculous that its laughable in its content.
          nsomniac
          • Learn your geography mate

            Around 70% of Australias population live in our capital cities (Sydney, Perth, Darwin, Adelaide, Melbourne)

            The same cannot be said for places like Britain, where as Dobbie stated, London holds just around 13% of their population

            Australia is one of the unique countries where the majority of our land is filled with nothing and majority of our population lives in centralised cities
            deteego
          • Learn you geography mate.

            "Australia is one of the unique countries where the majority of our land is filled with nothing and majority of our population lives in centralised
            cities".

            Correct and incorrect.

            As nsomniac rightly mentioned the majority live in urbanised areas. It is in fact the vast majority of nothingness which is centralised, herein lies the geographical build problem.

            Tell me how far is it from Sydney to Perth (and what's in between) as opposed to London to Liverpool?

            This is why nsomniac is again correct imo, as comparisons to overseas is primarily useless and ridiculous.

            BTW again learn your geography mate, what about poor old Hobart?
            Beta-9f71a
          • Thats not really an issue

            Fibre links between cities are incredibly cheap, and have existed in Australia for decades

            The main cost in fibre is last mile labor, thats not really an issue with national links where you basically have to deal with just 2 last mile installations (one on one end of the cable and one on the other) which can be providing gigabits of data between lets say Sydney and Melbourne

            The cost, per metre of fibre cabling is very cheap.
            deteego
    • Paranoid, you're right, the figure was wrong and has been updated. Sorry for the mistake. But the comparison is on 100Mbps speed services, so the lowest iiNet price is $80 (not $50), with download limits and no phone service. Let's remember NBN's wholesale pricing is speed based.

      Many of the other companies listed include calls and unlimited downloads - but I have ignored that because we know international bandwidth is a unique issue for this part of the world.

      This is not an anti-NBN piece idryss - the question is, should we cross subsidise outside the metro areas, or just subsidise them? The latter is more expensive but cuts prices.

      Say, for example, you had 100 homes, half cost $100 to provide a service to, the other half cost $50. Do you charge them all $75 (no need for government subsidy but half are paying 50% over the odds) or do you charge half the $50 and subsidise the rest ($50 X 50 = $2,500).

      The opposition would say, the latter, but it's a much more expensive option. But the first approach raises the cost for everyone, which could mean we end up paying more than some countries overseas.

      The third alternative is that people in regional Australia pay more.
      phildobbie
      • Thank you for making the update. I expected it to be a simple confusion of the fibre page and the NBN page, so no harm done.

        Also, I did say $50 cheaper, not that it cost $50. Anyways, thanks for the correction.
        Paranoid-beb39
      • iiNet's NBN1 plan at 100Mbps is $70. NBN2 at $80 is not their best price.
        Caffiene-c74e7
  • This article also ignores international transit and where content is sourced from. Hong Kong users would likely get the majority of content from Hong Kong and China sources (based on language), so there would be significantly less international traffic than Australia. UK and Europe have both a shorter undersea cable length to the US, and greater numbers of users to drive economies of scale for the usage of those pipes.

    Since Australia has a small population (relatively speaking), a low population density, and a long, expensive submarine cable run to the US (where the most of our non-local content is sourced from), this all is factored into the cost of our plans, which must be taken into account when doing a comparison.
    simonm-ce3fb
  • Simonm, that's why I ignored the fact that our plans are capped on downloads, whereas elsewhere they're not. The substantial cost is the NBNCo access charges.
    phildobbie
  • Underlying cost of the last mile depends on how many metres you have to go to get to each customer. Hong Kong and other very dense environments have very low numbers of metres to cover compared to covering 93% of Australia. If we said only 70% or 50% coverage with Fibre here (which would cause owling and gnashing of teeth here) then we'd have a much much lower cost. People previously have given examples in Amsterdam where you can get more than a customer per metre compared to Australia where you might only get a customer per 20-30m or even higher. The last 23% to get to 93% from 70% plus wireless plus satellite costs a great deal of money extra. We need to stop worrying about the rest of the world.
    themmc
  • More research is needed for this article

    The BT Openreach access prices for FTTH are found here

    Up to 100Mbit/s / 30Mbit/s "Transition product" (including Simultaneous Provide) UK436.32 pounds pa

    Notes:
    The “Transition product” is only available in conjunction with an existing WLR or MPF service

    So you have to pay additional for BT wholesale line rental as well as the BT fibre access

    The BT fibre 100Mbps/30Mbps access price is UK436.32 pounds pa or UK36.36/month = $AU55.05/month

    The NBN access price for 100Mbps/40Mbps is $38/month - much cheaper than the UK

    http://www.openreach.co.uk/orpg/home/products/pricing/loadProductPriceDetails.do?data=M80QNeH46o4g6JKGD604vTypQOKfNn%2Beo6vmoVhAOBZZ6rNZujnCs99NbIKJZPD9hXYmiijxH6wr%0ACQm97GZMyQ%3D%3D
    sjl-39541
    • That's true - but prices for 100/15 are considerably lower.

      I think I have opened a can of worms. It is, of course, hard to compare like for like, so perhaps I shouldn't have tried.

      The question remains, should we cross subsidise or just subsidise - and that's a debate that doesn't seem to have been had to any extent in the public forum.
      phildobbie
      • "The question remains, should we cross subsidise or just subsidise - and that's a debate that doesn't seem to have been had to any extent in the public forum."

        If the pricing is comparable then it doesnt matter.
        Australia will probably never be able to match Hong Kong or Singapore.

        If NBN pricing is similar to FTTH pricing in the UK, Canada and the USA (English speaking countries) - which it is, then it doesnt really matter.
        sjl-39541