On Internet services

With the debate raging in Canada about usage-based billing (UBB) by broadband providers, the National Post posted this article this week.  It shows, amongst other things, that the only two countries in the world that provide no unlimited data packages are Canada and Australia.

Being in the unique position of having lived in both countries (recently), I thought I’d put together some thoughts and information on this.

When I moved here (to Australia, that is), and was calling around to the small number of major internet providers here, operators frequently assumed I was American and added a sympathetic “our system [of data caps, price levels, etc] must be really confusing and complicated to you.”  Of course, I was used to it from Canada, but was startled to find it so explicit and in your face.

(Continues after the jump)

I’ll say up front that I am strongly opposed to having caps or UBB on internet data usage at all.  I understand that infrastructure is expensive, and that heavy use can clog the network, but the internet has become so fundamental to daily life that making it even more costly and/or limited is just greedy and mean-spirited.  But I think there’s something that can be learned from the Australian and Canadian experiences (each could learn a bit from the other).

One other side point is that Australia and Canada have very similar challenges when it comes to telecom – a large geographical area that has the vast majority of the people living within half a dozen or so metropolitan areas, and vast almost-empty spaces that still need to be served as there are small populations spread widely across them.  Often telecom companies make the claim that infrastructure is too expensive – that argument is irrelevant here in comparison, since both countries have similar needs (admittedly, Australia has a smaller land space, but much of Canada’s space is in Northern areas where virtually no one lives and many services are simply not available anyway).

Communication

One of the most obvious differences I noticed in Australia was how direct and honest the telecom companies are about what your limits are and the way their plans work.  Australians may laugh at this and complain about how incredibly complicated the packages and caps really are – but compared to Canada, where we have similar plans but are usually not told how they work, Australian telecom companies are completely up front.  This is one thing I really appreciate about being a consumer in Australia in general – various levels of government regulation very strictly control product and service labelling and advertising.

I was reminded constantly of the terms of the packages available.  I was reminded on the websites, when I spoke to representatives on the phone about the options, when I actually signed up for the plan (the agent and the recorded messages they’re required to play must have told me the same thing at least 3 or 4 times), by phone calls after that, by multiple letters and pamphlets mailed and/or emailed to me, and even when I activated the account over the phone.  They’re so strict in fact that what seems to me like a minor error in an advertisement prompted this form email to myself and all other Optus customers:

 

Finally, all of the telecoms tell you in advance what the minimum cost of your plan would be, over the course of its term.  It makes deciding on a 2-year plan much easier as the price comparisons are mostly done for you.  They also disclose the expected speeds as compared to the maximum speeds and provide information to consumers on what they can actually expect from their service.

I won’t rant about Canadian marketing, but it’s generally deceptive and confusing in comparison.  The speeds disclosed are usually “theoretical” speeds and affected by throttling and traffic, with generally very little explanation (at least, not in font larger than 4 point) as to what you can actually expect.  Likewise, the prices they disclose are usually deceptive – as an example, look at Bell’s page for its Fibe 6 plan, which shows a price of $31.95 per month… which of course is actually $41.95 less discounts you may or may not be eligible for and may require you to subscribe to other services.  And they only tell you about the $4/month modem rental if you expand the really small link for full offer details (which in turn only appears after you expand the link for pricing details).

Plans

I’m only going to look at the major providers here (Optus, Telstra, Bell, Rogers, and Telus), and only at “real” wired broadband.  Mobile “broadband” (3G modems or cards, basically) is a lot more prevalent here in Australia than it is in Canada, and people do actually use it.  It’s popular to the point that you can even get a 3G modem, set it up in your home, and create a network on it.  But I’m not going to discuss this as the comparison right now is of “real” broadband.  For all the plans below they seem to include both upload and download in their caps, though some discount providers in Australia set their caps on downloads only and provide unlimited uploads.

(Side note: Australian prices all include GST as that’s standard practice here, Canadian prices do not include GST/HST.  Assume for the moment that the currencies are at par as they’ve been hovering within a couple cents of one another for at least the last six months or so).

Optus (Australia)

Optus has a number of plans that vary based on usage and needs.  One thing that’s common amongst the various carriers here is that it’s usually cheaper to pay for a home phone line you will never use in addition to the broadband than it is to buy the broadband on its own.  I use the 120GB plan which is more than sufficient for my needs – I use the internet for sending/receiving files for work, as well as uploading photos (twice, since my computer backs itself up online), and downloading music and television shows on iTunes.  Their website has a comparison that shows the basic options, but basically the way it works is this: you are limited to the number of GB in your plan; for me, it’s 70GB off peak (midnight to noon) and 50GB on peak (noon to midnight).  If I exceed the 70GB off peak, any further off-peak use counts towards my on-peak time.  I’ll explain the consequences of going over below.  The service runs about $65-$70/month (taxes included), and includes a home phone line I don’t use.  You’re also locked into a 24-month contract with hefty cancellation fees if you cancel early – there is no non-contract option.  You can see the other data packages on the link above, but they’re roughly $70 for 30GB (this comes with cheaper long distance phone rates), $90 for 150GB, $100 for 500GB, $129 for 1TB – again, all with their own on-peak/off-peak internal limits.  All are “super fast broadband,” which in the city averages about 8 Mbps linespeed, with maximums theoretically higher than that.  A wifi modem-router combo costs extra (usually around $150, depending on what deals they offer you), as does “installation” of up to $200 even though you do literally all of it yourself.

Telstra / BigPond (Australia)

Telstra’s plans are equally diverse and even more confusing that Optus’.  The prices end up working out to be roughly the same, but the caps are different.  A stand-alone package (since their website is a little more confusing when it comes to explaining the phone portion of things) is $80 for a 50GB cap and $100 for 200GB (I assume each would be roughly $10 cheaper in total if you packaged it with a home phone line), with speeds comparable to Optus’.  There are also unadvertised plans (buried in the terms) of 25GB for $60 and 100GB for $80.  There is no time-of-day metering so if you want to use all of your data between noon and midnight, you can.  As with Optus, you pay extra if you want a wifi modem-router, and the excessive installation fees apply even if you install it yourself.  As with Optus also, you have a minimum plan, usually 12 or 24 months.

Rogers (Canada)

Rogers’ plans are theoretically based on speed, but lower speeds also come with lower caps.  Ignoring the Lite plans, their plans are $47 for 60GB at 10Mbps, $60 for 80GB at 15Mbps, $70 for 125GB at 25Mbps, and $100 for 175GB at 50 Mbps (plus $3 modem rental plus HST depending on what province you’re in for all of these plans).  Wireless routers are an extra $1.50-$3 per month.  There are no time-of-day restrictions and you generally don’t have to sign a contract unless you bundle your services.

Bell (Canada)

Bell’s plans (I hope this link works) are similar to Rogers in terms of speed and caps.  If I’m backing out all the hiding and deceptive pricing correctly, I think it’s $42 for 25GB at 6Mbps, $47 for 50GB at 12 Mbps, $57 for 75GB at 16 Mbps, and $63 for 75GB at 25 Mbps (plus $4 modem rental plus HST depending on the province you’re in, for all plans).  Wireless modem-routers of varying qualities are included in the price.  There are no time-of-day restrictions and you generally don’t have to sign a contract unless you bundle your services.

Telus (Canada)

Excluding temporary / short-term discounts, Telus’ plans seem to run as follows (excluding Lite packages again): $37 for 75GB at 1.5-6Mbps, $50 for 125GB at 10-15Mbps, $37 for 125GB at 3-15Mbps, and $50 for 250GB at 5-25Mbps (the last two plans are not available without OptikTV, so would actually work out to be much more expensive if you didn’t want the TV service).  All prices include the wireless modem (and often some home entertainment gadgets), but not GST/HST.  There are no time-of-day restrictions and you generally don’t have to sign a contract unless you bundle your services or take advantage of certain discount offers.

So, unless I live in a province served by Telus (BC and Alberta, I believe), for the data usage I have available to me right now in Australia I would have to pay at least $10 above what I’m paying here (and I totally thought I was getting ripped off when I arrived here – after imposition of UBB in Canada it’s actually much cheaper in Australia now) – and if I went with Bell I wouldn’t even have close to the monthly limit I have here.

Overages and throttling

I’ll admit to not being an expert in this, so if anyone can correct, please do so in the comments.  The rules are generally similar based on the country:

Australia

There is no throttling of your service under regular usage.  I used a link found through one of @RichardBranson’s tweets (on #StopTheBroadbandCon – a completely separate issue but very relevant) to test my internet speed, though he’s since taken the link down.  I’ve tried another site and seem to be consistently getting just over 8MBps line speed or download speed of 1010KB/s (I’ll confess to not knowing the exact difference!) and my upload speeds tend to range between 500 and 700 Kbps.  This is comparable to (better than, actually) what Optus discloses on their site as the average speed for my service.  I suspect this would be comparable to the max-10GB-12GB plans offered in Canada; that is, if Canadian companies didn’t also throttle their service.

If you exceed your data cap, there is no extra charge – they just throttle your service.  Unfortunately, the throttling is drastic – down to 64kbps on Optus’ regular plans and Telstra’s < 100GB plans, and 256kbps on Optus’ premium plans and Telstra’s 100GB and up plans.

Canada

I’ve never been able to get a straight answer, but my understanding is that all the Canadian providers throttle their services, and get away with it by saying the advertised speeds are “up to” the rate.  It’s not clear to me (if anyone can clarify, please do) how the throttling is determined, but I assume it’s a balance between internet traffic as well as your monthly limit divided out over time.  Either way, speeds are usually much less than advertised.

If you exceed your data cap, however, you generally are not throttled, buy pay a per-GB overage fee – usually in the area of $2 per GB.

 

I know that Canadian companies do provide monitoring services, but I have to say I really like the Optus one – it’s clear and it provides some visual information (see below) that helps to monitor my use.

 

Other – NBN and Profits

One other innovation Australia is well on the way to achieving is a National Broadband Network (more on wikipedia).  Ultimately, the goal is to provide a nationwide network (to 93% of homes, with the remainder to be covered by other versions of internet access – these would be primarily in rural areas), with download speeds of 100mbps and peak download speeds of 1 gigabit per second.  All through fibre optics, of course.  Unless anyone can correct me, I don’t think this is even on the radar in Canada.  While this network may eventually translate into higher prices (hopefully it doesn’t, as the government’s investing quite a bit into it), it will also allow more competitors to get into the market as it will be Open Access.

It would be inappropriate to make all these comparisons without considering the profits of the companies involved.  Since 2010 statements aren’t all available I’m going with the most recent annual statements here.

Telstra serves 4.3 million fixed internet customers, earning EBITDA (earnings before interest, taxes, depreciation, and amortization) of 41% on $2.1B of revenue, which would mean profit per customer of roughly $200 per customer (June 2010 fiscal year financials).

Optus is a subsidiary of SingTel, so it’s hard to find precise numbers.  The SingTel statements show Optus have just under a million broadband customers, with operational EBITDA across the consumer/small-business field of 15% on $1.4B (24% for business and wholesale, and no info on the number of customers).  Addressing only the consumer/small-business field since there’s not enough information on the business/wholesale area, and combining data and home phones (which is actually logical here since they’re generally sold together even if the customer doesn’t want a phone) this would be $214 per customer or so.  (Numbers are for March 2010 year-end).

Telus shows data revenues of $2.1B in 2009 on 4 million network access line customers and 1.2M internet subscribers.  They don’t show voice costs separately from data, but assuming a consistent margin across voice and data (this is a big assumption and unfortunately likely makes this inaccurate), that works out to 31% EBITDA, or $125/customer.

Bell (BCE, actually, which includes Aliant) shows total high-speed internet subscribers of 2.9M in 2009.  With $3.7B (Bell) + 0.6B (Aliant) of revenues on data, and making the same assumption that “wireline” EBITDA percentages apply ($3,907M/$10,666M or 36.6%), that’s $543 per customer (somehow this number seems high in contrast – if anyone can find an error in my numbers please let me know!)

Rogers shows $3.9B of Cable division revenue for calendar year 2009, of which 20% (or $780M) is High-Speed Internet.  Operating profit (not necessarily the same as EBITDA) is 1.3/3.9 or 33% for the division as a whole (“Cable operations” only, which excludes telephony & Rogers Retail, is $1,298/$3,074 or 42%), and there are 1.6M residential subscribers.  Using the Cable Operations percentage, Rogers makes about $205 on each internet customer.

 

There’s a lot more information in this entry than is necessary to draw any conclusions but I’m sharing this information in case anyone has further use for it.  I think on average the telecom companies in both countries are making about the same on their internet customers regardless of the country they’re in – though there’s less variation in Australia than in Canada.

What people want, obviously, is as much speed and data usage for as little money as possible.  Both countries apply data caps, but for the average user (I would consider myself an average user), Australia now has slightly cheaper plans and more clear limits and speeds.  If you want faster speed, you can get it in Canada for a much higher price – and you might run up against your limit a lot faster, especially if you’re on Bell.  Down the road, since Australia is well on the way to an NBN and Canada is barely even contemplating it, speeds should in theory increase in Australia – with higher download limits already, it will end up with a clear advantage.

I definitely support the NBN and think it’s high time for both countries to re-evaluate the UBBs in place – especially in Canada where the limits are much lower.  In Australia, I put up with the limits because the rates are (now) comparable to what they are back home, but I get a faster and more consistent connection.  I know that throttling will not happen unless I exceed my limit, which is unlikely, so I can get the most of the high speeds.  I welcome the announcements from Tony Clement that he will oppose the UBB and hope that continues – but I also hope scrapping the UBB doesn’t lead to the telecoms throttling speeds even more than currently.  I’d rather have UBB than internet that’s even slower than it is now in Canada (because, frankly, what would be the point?).  Finally, overage charges, especially when it’s often difficult or impossible to figure out when you’re going to go over, are absurd.  I do like the throttling only-after-exceeding-your-limit option, especially if it’s accompanied by a good monitoring system and notifications when you’re approaching the limit – but would still prefer no limit at all.

 

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8 responses to this post.

  1. […] This post was mentioned on Twitter by Neal Jennings, Neal Jennings. Neal Jennings said: On Internet services http://wp.me/p10XZh-1D […]

    Reply

  2. Actually, there are smaller providers with unlimited plans in Canada, at least for now. TekSavvy Internet has unlimited 5Mbps DSL for $36.95, and 15Mbps unlimited cable in some areas for around $50. You have to buy a modem for $50-$100 up front, and if you don’t have an active phone line you need to pay a dry loop band fee of $5-$25 per month depending on your location. I don’t know much about their cable service, but they don’t throttle their DSL and have fought the CRTC to prevent Bell from throttling their wholesale lines in the past. The “up to” 5Mbps is because of the electrical characteristics of twisted pair copper wire: the further you are from the telephone central office, the weaker your signal is.

    Reply

    • Thanks Greg! But don’t they now have to pay Bell based on usage – and won’t they in turn pass it on to the customer? How are they affected by the latest CRTC ruling?

      (As an aside, there are discount providers here, too, but I (and I assume the National Post article) was working mainly with the majors that are use by most people).

      Reply

      • As of Friday morning, they’ve changed their website back to listing their old 200GB and unlimited DSL plans, probably because the feds are vowing to overturn the UBB decision. TekSavvy was saying over the weekend that they were going to have to set a cap at 25GB (imposed by Bell) at 5Mbps (imposed by Bell) for $31.95 (plus dry loop fee, etc), but were going to allow users to buy “insurance blocks” of 40GB for $4.75 (up to 120GB extra) or an extra 275GB for $55. So at least they were trying to provide options, despite the ridiculous cost (also imposed by Bell). Their cable packages were never affected by the UBB decision because Rogers is not involved, but I’m sure if Bell gets to impose UBB on wholesale service then Rogers won’t be far behind.

        Reply

        • Right – which is what prompted the whole UBB freakout, this post, and Tony Clement’s announcement. Hopefully this all gets sorted soon. I do hope, though, that they don’t just ban UBB on its own without addressing throttling – that’s the real concern here.

          Reply

  3. […] never been more relevant than now.  I would also consider some earlier posts (namely ones on Internet Services, Development, and Standards) part of this series, though they weren’t explicitly so at the […]

    Reply

  4. […] in my Canada / Australia blog series, here we go.  I’ve already done a lengthy entry describing internet services in Australia vs Canada, so I won’t spend any more time on it other than to provide a link to […]

    Reply

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