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How much does broadband really cost?

By static in Internet
Wed Feb 06, 2002 at 10:05:21 PM EST
Tags: Help! (Ask Kuro5hin) (all tags)
Help! (Ask Kuro5hin)

I don't mean things like an ISPs Terms of Service, or customer service issues or even political shenanigans. I mean actual costs for a provider to provide ADSL or cable access to the Internet and still turn a profit.

The reason I ask is because I want to get broadband at home. Unfortunately, I also want one with static IP just like the modem connection I currently have.

However, they are expensive. So far, without fail, the Australian DSL providers will sell you a "business" plan to give you a static IP address. For the actual owner of the copper, their Internet service via DSL is roughly 4 times the price of one without a static IP address - which was already roughly 3 times what I pay for my always-connected modem. This is Telstra Bigpond, who are the most expensive DSL provider in Australia (everyone else is half the price or less). There are other DSL providers in Australia, but they have to lease the raw DSL access off Telstra. Interesting conflict of interest.

It gets worse. ADSL in Australia has become vastly unreliable in the past few months - and I mean the raw DSL bit that Telstra has sole control over. Imcompetance notwithstanding, I'm curous as to whether Telstra are making any money on the DSL business. Perhaps they aren't. They have gained notoriety for raising prices and limiting usage in their Internet services as much and as fast as they can get away with in the last 12 months, which adds some credence to this.

So just what does it cost to rollout, maintain and make a profit on ADSL? I wouldn't want to find a good price, mediocre service and find the ISP out of money in a year.


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How much does broadband really cost? | 32 comments (29 topical, 3 editorial, 1 hidden)
Background on Telstra's ADSL rollout. (4.00 / 1) (#1)
by static on Wed Feb 06, 2002 at 06:59:54 AM EST

For some background about the (short) history of ADSL down under, you might like this: ADSL in Australia. I found it while researching my story.


More on Telstra (4.00 / 1) (#2)
by Builder on Wed Feb 06, 2002 at 07:05:32 AM EST

If you want to read more about Telstra and the outcry that has been raised over them from time to time, head over to The Register and search for Telstra.

They have done some fairly good coverage on this topic. They also have a lot of info on the UK broadband scene (or lack thereof)

Be nice to your daemons
Another question (3.00 / 1) (#3)
by Nickus on Wed Feb 06, 2002 at 07:17:18 AM EST

One thing that upsets me is why they only sell static IPs to business plans. I have T-DSL here in Germany and they disconnect my line once every 24h to force a new ip address. I would be ready to pay some extra for a static ip but not get a business DSL. It is not only for running services but I could narrow down firewall rules at work and things like that if I knew that I am always coming from one place. There should be the option of a static IP also.

Due to budget cuts, light at end of tunnel will be out. --Unknown
One option... (3.00 / 1) (#25)
by tchuladdiass on Thu Feb 07, 2002 at 03:34:59 PM EST

... You can go ahead and get a business class line, and sell services over it (not full web hosting as that would take a lot of bandwidth, but maybe specialized cgi scripts, shell account access, virtual servers running in user-mode linux, etc.), and use that to fund your dsl line.

Or, see if you can find a seperate ISP that will lease you a static IP that you can tunnel through your DSL line. Does anyone know if an ISP that will do this? and if so, how much?

[ Parent ]

Interesting (none / 0) (#29)
by Nickus on Sat Feb 09, 2002 at 01:04:18 PM EST

An interesting suggestion but with my current work load I would not be able to sustain any kind of service.

Due to budget cuts, light at end of tunnel will be out. --Unknown
[ Parent ]
Most cost, less service (5.00 / 1) (#6)
by Torgos Pizza on Wed Feb 06, 2002 at 11:48:17 AM EST

This is actually going to be a problem in the future. The cost of Internet service has been steadily going up for the past couple of years, with little return in service. In my case, I pay a few dollars more each year and lose features such as static IP, bandwidth and access to sites and newsgroups. It's not just in Australia, it's happening globally.

There are some real issues to explore here and many factors. Many revenue streams have dried up or changed. Funding from IPOs and angel donors are harder to come by. Infrastructure and backbone cost the ISPs money that in turn are passed on to the consumer. But where do we cross the line at cost cutting measures by the ISP, to price gouging for a providing a service?

I intend to live forever, or die trying.

in the U.S. (5.00 / 6) (#7)
by Arkady on Wed Feb 06, 2002 at 12:05:59 PM EST

I have no idea how the situation in Australia is, but as an operator of a garage ISP in Oakland, I can tell you how it is in the U.S.:

Pacific Bell, the local state-sponsored phone mompoly, charges us roughly the sameto wholesale lease a line for a user as they charge their own users retail (their ISP contract actually forbids me to tell you what that is). This means that it is quite literally impossible to be price competitive with their retail ISP branch; what do you think killed NorthPoint, Rhythms and @home and is slowly destroying Covad?

If you try to offer a DSL package which is competitive with theirs price-wise, you end up getting ~$2-5/month from the user above your _cash_ cost to PacBell for that line. And how many other costs are there that aren't tied to a specific line:

1) link to PacBell - we have to maintain an ATM data line to PacBell, over which they send us all the traffic from the DSL lines we have leased; this is something like $800/month spread across all the users

2) bandwidth - we still have to maintain our links to the outside Net (meaning colocated router at a Tier 2 Network), for which we have to pay a monthly colo fee and bandwidth usage fees

3) staff - we're a collective, and set up so that rather than a fixed salary those of us who run it get paid only from profit, so we don't get paid unless we're actually _making_ money after all these other expenses are dealt with ;-)

What this comes down to is that we've settled on $90/month as the least expensive possible DSL line. To make up for the fact that we _have_ to charge more, we do give static IP allocations (starting at 8-16 numbers), web hosting, DNS/email service, shell accounts and everything that you _used_ to be able to expect from an ISP but few seem to do anymore.

It certainly means we lose a lot of potential users to PacBell and large funded ISPs (who, like EarthLink, are losing money _now_ in the hopes that the rules get fixed before they join NorthPoint in bankruptcy), but we've found that there are people out there willing to pay a fair price in order to get a better possibility that the ISP won't go out of business next year because it wasn't charging enough.


Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere Anarchy is loosed upon the world.

You forgot the plug! (4.00 / 1) (#8)
by rusty on Wed Feb 06, 2002 at 12:21:36 PM EST

What Arkady didn't mention is that if you're in the SF Bay area, and need geeky DSL service, you can find them at http://www.cliq.com/services/dsl.html. Having dealt with Pacbell myself, you will be really really glad you're willing to pay a little bit more. :-)

Not the real rusty
[ Parent ]
damn! (3.00 / 1) (#9)
by Arkady on Wed Feb 06, 2002 at 12:44:44 PM EST

Actually, since I don't really like typing HTML (having been doing it since '94) I almost always post in plain-text. This does mean that I often leave out links just to avoid typing "<p>" 10 times.

I considered it this time, though I decided to go for an informative comment rather than looking likeI was using the comment just to drum up business. As it is, the comment does look like it touts CLIQ a bit (which is natural, since the point _was_ to describe why the way we deal with this issue is better) and by putting in a direct link it would start to look a bit too much like an ad for my tastes. I think this is the second time you've posted a link to one of my projects after I had decided not to (as in my article about ICANN and terrorism). ;-)

Speaking of ads, though, where can I sign up to get the first text ad? Having been one of the first to argue against it back when you first put ads on the site, I like the irony of being the first to purchase one now that you're doing them yourself ...


Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere Anarchy is loosed upon the world.

[ Parent ]
Sooooon (3.00 / 1) (#10)
by rusty on Wed Feb 06, 2002 at 12:57:11 PM EST

As always, everything takes forever. Mainly what I'm waiting for right now is Thawte to sign our SSL cert so it doesn't look like I'm trying to h4x0r everyone's gibson when they try to buy an ad.

I wanted it to be this week, but now it's looking like next week.

Not the real rusty
[ Parent ]

No phone lines involved at @home (3.00 / 1) (#11)
by aphrael on Wed Feb 06, 2002 at 12:59:20 PM EST

what do you think killed @home

I'm not sure that this is a reasonable thing to ask in a comment talking about competing with pacbell by providing service over phone lines: @home provided service over *cable* lines and didn't pay a dime to pac bell.

Besides which, this question has an easy answer: they were raped in a complicated business manuever by an extremely cynical management team at AT&T.

[ Parent ]

I know that (3.00 / 1) (#12)
by Arkady on Wed Feb 06, 2002 at 01:06:29 PM EST

(I'd be a pretty poor ISP operator if I _didn't_ know that. ;-)

But @home has a very similar relationship to the local cable TV monopoly as the DSL companies like Covad and NorthPoint have to the local phone monopoly.

I didn't mean to imply that the situation was identical, merely that it is analogous.


Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere Anarchy is loosed upon the world.

[ Parent ]
What I'm paying (none / 0) (#13)
by DoomGerbil on Wed Feb 06, 2002 at 02:39:12 PM EST

I have PacBell DSL in Southern California. I pay $45/mo, get 1 dynIP, and have 1.5mbit down/ 160kbit up. I even got the service tech that came out to fix it when it died to trade me an old U2W-SCSI hard drive I had lying around for a brand new DSL router. Every other company I'm aware of ratchets up the price for faster speeds. The way PacBell here does it, I pay my $45/mo, then get the fastest speed I can get (up to 1.5m/160k). My line tested at 8mbit capable because the telco box is just down my front stairs. If I wanted to shell out for business DSL (about $140/mo) I'd have 1 static IP, 8mbit/768k.

Also PacBell here (none / 0) (#14)
by msphil on Wed Feb 06, 2002 at 04:25:55 PM EST

But the current offerings are $50/mo for what you have (business or residential), and $65 for 5 static IPs (business or residential). I think prices have come down since you looked :-)

Earthlink did the same pricing, but $65 only netted you one static IP.

Mind you, mine doesn't fire up until tomorrow, so we'll see how it looks then...

[ Parent ]

Options down under. (none / 0) (#16)
by static on Wed Feb 06, 2002 at 06:09:22 PM EST

I had quite forgotten what a "business" service means to many people. For most DSL Internet services in Au, "business" doesn't mean you get charged a shitload more (except perhaps the setup fee). Instead, it means you get at least 1 static IP. OTOH, the faster speeds (including SDSL) tend to only be "business" services, so they do cost more.

I currently pay about Au$0.22/Mb download for my modem with a monthly minimum of Au$22. Consumer DSL (no static IP, no servers) from Telstra is about Au$70/mo for 300Mb on a 256/64 link. The same with a static IP from Telstra is Au$249. (I just had a peruse of the AUP - Telstra don't prohibit servers on a Consumer ADSL line but the lack of a static IP would make it inconvenient.)


[ Parent ]

they really charge you per megabit? (none / 0) (#17)
by labradore on Wed Feb 06, 2002 at 11:19:11 PM EST

Remind me never to live in Australia. Gees, I thought US telco/ISPs were bad.

[ Parent ]
Megabyte. But yes. (none / 0) (#18)
by static on Thu Feb 07, 2002 at 12:40:03 AM EST

Amongst permanent Internet connections, only a few high-end options do not have metered access. Widespread, un-metered access is, I'm told, rare outside the US.


[ Parent ]

canada too (none / 0) (#28)
by roju on Fri Feb 08, 2002 at 05:49:27 AM EST

don't forget canada

although from the looks of it, that's gonna change soon

[ Parent ]
I have cable. (none / 0) (#20)
by scanman on Thu Feb 07, 2002 at 01:23:36 AM EST

I decided to go with Road Runner cable because the local mafia^H^H^H^H^H telco is Qworst, and they are not only in bed with Microsoft, they have already had grandchildren. But I digress. I get 2Mbps down/384Kbps up, with a "dynamic" IP that has actually never changed once (even when shutting off the computer), some amount of e-mail addresses that I never use (I run my own mailserver), no port-blocking, filtering, bullshit, CODs, or free parking. Pretty good deal, IMHO. By the way, they actually are UPFRONT about problems on their end, and they KNOW what Linux is! How cool is that?!

"[You are] a narrow-minded moron [and] a complete loser." - David Quartz
"scanman: The moron." - ucblockhead
"I prefer the term 'lifeskills impaired'" - Inoshiro

I'll comment because I work at one. (5.00 / 1) (#21)
by gromm on Thu Feb 07, 2002 at 05:51:51 AM EST

My boss, who has recently been to a meeting of some sort with some bigwigs at Telus and a bunch of other people, says that for them, it costs $55 CDN per customer to provide residential ADSL service. This of course is the average, over a fairly large service area, where networks tend to be cheap and fast. However, they charge either $35.95 or $39.95 for residential service, depending on the plan, plus freebees to entice potential customers to their service. Both plans are done with a dynamic IP address assigned by DHCP. The reasons they give for using dynamic IP's are that they can make wide-scale changes to their networks without service interruptions, that they can technically use fewer IP addresses, and that it's supposedly cheaper for technical support costs.

The reality of it is that while wide-scale changes can be made without interruption, the IP's don't change often enough to really make a difference, it's been found that technical support is actually needed less with fixed IP addresses, and when a DHCP server fails, noone can connect at all. With regards to technical support, the system they use for actually tracking who's allowed on is quite obnoxious, as opposed to a fixed IP system like we have, where IPs are assigned and restricted that way. All that is needed is for the modem to be programmed (which we do at our office) while the user just plugs it into the wall and changes his/her network settings. We very rarely get technical support calls from ADSL customers with this system, which is actually much less complex for the user than dialup is, with all its quirks and shortfalls. (I just love explaining to people that they actually have to be *connected* before they can start doing things online)

But even here, in a country that has some of the best and cheapest networks over the longest distances, our ADSL providers are mostly losing money. This is primarily due to how much money customers are willing to pay for their service, and also how 20% of the users (generally the smart ones... this gives me so much faith in humanity) use 80% of the bandwidth. The way to solve this of course is to charge for bandwidth, but the company that does this first is the one that loses 20+% of their customers to the one that does it last (or not at all).

So there you have it. That's why DSL is not affordable, or if it is, why that won't last long. I imagine that someday it will be cheap enough to provide the bandwidth needed to all the hogs so that the providers actually make money, but by that time a good 'ol 1.5 megabit connection will be obsolete and noone will want one. Oh well.
Deus ex frigerifero

Most useful. (none / 0) (#26)
by static on Thu Feb 07, 2002 at 04:59:23 PM EST

I'm one of those who'll pay reasonable costs for broadband that keeps the ISP afloat. The numbers you quote suggest that the current prices being asked in Australia probably reflect profitable operations.

On metered access: Internet access has been metered in Australia from very very early on. A few years ago, when your only option was dial-up, a few ISPs tried for unmetered accounts. They were swamped. They also went backwards, financially. The trouble is that pretty much all the upstream connections are metered. If you find unmetered access in Australia, then there are other restrictions, like a maximum number of hours per day you're allowed on or whatever.


[ Parent ]

sweden (4.00 / 1) (#22)
by tero on Thu Feb 07, 2002 at 06:58:40 AM EST

I live in Sweden and use a local ADSL provider BoStream. I get a static IP, 2 Mb downstream and 0.75 Mb upstream.

With the current conversion rates (www.xe.com) I'm paying about $23.5/month for the connection, and paid about $140 as a one time installation fee.
The connection is not capped in any way (other than the 2 Mb, max), and I'm not paying per Mb, and can run my own services (web and e-mail etc.) as long as I'm not running anything commercial or traffic doesn't create load problems for their switches.

To answer your question, I don't know if those rates are profitable, since the state owned telecom company Telia is offering similar (although with lower bandwidth and dynamic IP) service for the same price and is apparently under a lot of pressure to raise the prices (rumors say they want to double the monthly fee).

I suppose the profit marigin of BoStream remains to be seen, but so far (been a customer for a year) it's been working ok, and they seem to be turning enough profit to keep their noses above the surface.

So I soppose there is light in the end of the tunnel, at least in some cases. IMHO it seems like many of the *DSL service providers bought the hype and started thinking about market shares instead of the the actual services they were supposed to provide, and now they and their customers have to pay the price.

Visit my homepage
DSL/internet in the UK (4.00 / 1) (#23)
by katie on Thu Feb 07, 2002 at 07:11:44 AM EST

My house connection used to be through ISDN to Demon. Demon are a pretty reasonable ISP - they don't really care what goes up and down the wire as long as it looks like IP when they get it and they don't have people complain to them about what you're doing. Hence - no crap about servers. BT do a flat rate fee for the line, 15 quid a month, Demon charge 20 for the flat rate connection - 35 a month = always on internet. Not fast, but there.

I considered getting ADSL to my new house instead of getting the ISDN. Problem: BT runs the phone system in the UK.

BT has decided that anyone who wants to connect anything bar a standalone Windows PC must be a business and hence can pay 1200 quid a year ($800US) for the connection. Instead of the 600 quid for the standard one. The standard one comes with a cable modem/USB adaptor and Windows software ONLY.

There are no other options for generic ADSL - Demon, for example, and other ISPs do do ADSL, but actually it's a resale of BT's product. And hence has the same conditions.

They sort of can sell you their own ADSL, with their own conditions. But: That involves installing their own equipment at the exchange. Which BT must let them do. However no-one mentioned how /quickly/ BT has to let this happen. Hence, almost 150 customers in the UK have so far had these systems installed over the last two years. So you can buy it, you just... can't have it installed and working...

I could get cable, but they tend to come with the old "no servers, no, not even SMTP servers, no IP address, a whole 5 email addresses..." stuff.

Personally, I'm sticking with dial-up for the time being. The government wants everyone to have broadband, but have engineered a situation where everyone who isn't put off by the cost is put off by the technical obstacles.

money conversion (none / 0) (#24)
by lordpixel on Thu Feb 07, 2002 at 02:16:58 PM EST

Unless something has gone very wrong since the last time I went to England

1200 quid ~= 1600 bucks, not 800

Mind you, if you can get me that exchange rate I'll be more than happy to do business ;)

I am the cat who walks through walls, all places and all times are alike to me.
[ Parent ]
This sounds familiar. (none / 0) (#27)
by static on Thu Feb 07, 2002 at 05:19:40 PM EST

Taking the corrected exchange rates into account, BT's "consumer" ADSL service is about halfway between what Telstra charge here and what everyone else charges. The BT "business" service, however, outdoes Telstra! The Windows distinction stinks, of course.

We had similar problems with other ISPs re-selling DSL needing to install their own equipment at Telstra exchanges. Telstra was being Very Difficult until the ISPs eventually got some government bodies, specifically the ACCC and the TIO, to slap them down. Maybe the UK needs a few similar organisations.

I considered ISDN several times in the last few years. Unfortunately, Telstra has kept the price of ISDN prohibitively high and ISDN ISP access is also rich. There was some noise a few years ago about making ISDN available to everyone, but when making that happen, the government forgot to tell Telstra that it had to be at reasonable prices, too. :-( Meanwhile, broadband has come and end-users aren't much interested in ISDN anymore.


[ Parent ]

It's pretty appaling... (none / 0) (#30)
by n0mj121 on Tue Feb 19, 2002 at 03:23:54 PM EST

... that BT are still allowed control over the UK's main phone service. All my information services (phone, TV, internet) are switched over to Telewest, who do a great broadband service (BlueYonder) which is only 25 a month (33 if you don't subscribe to their also very cheap phone/tv services). 512kbps down, 128kbps (or more, I can't remember, but certainly no less) up. The phone service is also a lot cheaper than BT's, and the TV is good too (but not really relevant here :P). HOwever, as Telewest and it's subsidiaries don't have their optical infrastructure everywhere in the UK, for many people BT is the only overpriced, oversubscribed and undermaintained option.

[ Parent ]
NTL cable Internet (none / 0) (#32)
by womble on Sat Mar 09, 2002 at 11:47:31 AM EST

Costs about 25/month (depending on whether you rent or buy the modem) for 512/128 kbps or only 6/month for 64/32 kbps (comparable to dial-up speed, but always on). No restrictions on servers, so long as you don't use vast amounts of bandwidth. 1 IP address, assigned by DHCP but so rarely changed that it's practically static. Limited email addresses, but why not buy your own domain and make your address independent of your ISP? The transparent web proxy can occasionally interfere with web access, but normally works fine.

[ Parent ]
Costs for a Minnesotan ISP (none / 0) (#31)
by Evil Petting Zoo on Sun Mar 03, 2002 at 03:31:26 PM EST

I work for an ISP in the Minneapolis area that offers DSL. We only offer DSL to Qwest customers (the prominate local phone company) due to cost considerations. We charge around $18/month for residental ISP service, and the customer pays for the DSL service from Qwest ($20 or $30/month).

This model profits my company more than a regular dialup connection. The largest reason for this is that phone lines and access servers are expensive, but with DSL, you only pay for the bandwidth the ATM connection to the phone company uses. That means that growing from 50 to 500 customers cost us very little in expansion costs, while the same level of growth would require additional phone lines and an upgrade to an access server (modem bank).

Most of the costs for DSL goes towards bandwidth to the Internet. Most personal customers end up using very little bandwidth throughout the day. Business customers and some personal customers will tend to use a lot of bandwidth throughout the day, but most of them have more expensive business class accounts.

In other markets, the deciding factor would be the DSL provider themselves. They are the ones making the large investments to provide the service, and they amount to the majority of the costs the customer has to pay (directly or indirectly). In America, they are (currently) required to allow for competition.

How much does broadband really cost? | 32 comments (29 topical, 3 editorial, 1 hidden)
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