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Long-term cost benefit for broadband

Last week, WA Business News began its six-part series on broadband Internet access by describing what it is and the means through which it is available. This week’s article covers what the heads of most businesses want to know: how much does broadband access cost?

p Hugh Halloran

IN short, broadband Internet connections cost more than dial-up modems with regard to set-up costs and ongoing access fees.

Internet Service Providers typically argue there are no ‘hidden’ dial-up costs for most broadband services (except ISDN) and that, when you account for these, dial-up access is not as cheap as it seems to be compared with broadband.

Faster download/upload times also mean less time is wasted waiting for file transfers, which, ideally, means your business works more efficiently.

There is much truth to these claims, which essentially point out that services like ADSL are a superior product. But it is precisely because of their superiority that they attract a superior price.

While there is much competition among ISPs to lure customers over to broadband networks, there is little variation in the prices these companies charge the average business or residential user. But it is also true that the greater a company’s needs in terms of user (staff) numbers and information transfer volumes, the more likely it is that company will be able to negotiate for better prices and service commitments.

The fight among ISPs and network providers to win as many customers (and the bigger the company, the better) as possible is intense – shop around, but read the fine print on your access agreement.

Space restrictions here do not allow every provider’s many pricing schemes to be covered, and there is no ‘typical’ cost of the less common broadband technologies like satellite and wireless – arrangements for these are usually negotiated between individual suppliers and customers.

As a guide, however, the lowest cost for both business and residential access to Telstra BigPond’s cable network is $55 per month if your phone account is with Telstra and $76 if you use another carrier.

This price allows a monthly ‘usage allowance’ of 300 megabytes (MB), which is not the same as a ‘download limit’ – a usage allowance counts uploaded information as well as downloads. Monthly costs for BigPond’s ADSL access are slightly more expensive, starting at $60 per month if your phone system is Telstra pre-selected.

Monthly access charges rise according to the preselected data transfer speed for ADSL (cable speeds are uncapped), though as your usage allowance increases – BigPond charges $440 per month for a 10 gigabyte ADSL plan –the penalty charges for excessive use decrease.

On top of access costs are a one-off cost of up to $400 for the installation of either cable equipment or an ADSL modem, and charges of between 12 cents and 16 cents for each downloaded megabyte beyond your quota.

When switching to broadband, it’s typical for usage patterns to follow the ‘pay rise principle’. Basically, this assumes that, as you earn more money you tend not to keep to your past budget, but modify it to suit your new wage – you spend more.

Likewise, now that broadband access has proved itself to be so useful by facilitating far larger and quicker downloads, you and your staff are likely to make greater use of this benefit without realising how much your usage allowance has been exceeded by until the first month’s bill arrives. This is usually a shock.

Having realised that company expectations are often initially conservative, and in an effort to distinguish themselves from Telstra’s so-called ‘one size fits all’ approach, smaller broadband providers offer greater flexibility in their plans.

At least one Perth broadband provider has set up a system that allows a company representative

to visit that provider’s web

page, log in, and alter the company’s plan in terms of down-load limits and data transfer speed.

It seems logical to assume that, as more people and businesses begin to use broadband services, the prices of these services will come down as they have, to a point, with dial-up access.

Among the industry itself, however, there is not the degree of certainty about this that might be expected. Dial-up access is available virtually anywhere in the State, except for quite remote communities, and it can be offered by even the smallest of companies.

To contrast with this situation, the most commonly used modes of broadband delivery – DSL, cable and fibre-optics – are yet to be made fully available across Perth’s suburbs, let alone across WA (and the cost involved in deploying such networks will prohibit this happening for the foreseeable future). In addition, there is still insufficient retail competition in broadband delivery to force any kind of price war.

While Telstra sells ADSL access from $60 per month, its wholesale access rate for ISPs is just $50 per month. To maintain profit margins, ISPs therefore tend to approach customers to sell their ‘superior’ service abilities rather than to undercut their competitors’ prices.

“The consumer will get benefits in the years to come,” one executive said.

“The bumpy road of deregulation and new entrants that occurred from 1998 to 2000/01 is now settled, and I think they’ll see the benefits roll out now that the market’s come back to a handful of sustainable players.”

p Next week: where are broadband services available.

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