Where your ISP fee goes

Posted on 12 Mar 2009 at 10:31

Most people still pay hundreds of?pounds a year to their broadband provider, but where?does that money actually?go? Here we reveal the data costs faced by an IPstream ISP (based on figures from?Plusnet and BT Wholesale), excluding any administration, marketing and staffing costs that the broadband providers must also meet.

Costs to the Exchange - the local loop

The first part of the connection runs from your router to the local telephone exchange, and is charged on a monthly basis. Depending on the particular exchange, the type of ADSL package chosen, and whether the packets are prioritised on BT??s network, the connection costs between £7 and £11 a month. For a mixed-package ISP of around 200,000 users, rental works out at approximately £1,500,000 per month.

Backhaul - the central pipe

From the exchange to the ISP??s Point of Presence, the traffic goes over central pipes. Installation fees for a central pipe are around £175,000. Plus, there??s a per-user rental charge of 87p. Then there??s a base rental for the 622Mbits/sec central pipe of £160,000 per year and a £166,800 yearly rental for each 155Mbits/sec segment of active pipe. Annual charges depend on capacity, but range from £160,000 for no traffic to £1 million for 622Mbits/sec of capacity to share among users. A 200,000-user ISP might need 25 segments over seven pipes, at a cost of more than £5 million or almost £130 per Mbits/sec.

Transit and peering

The costs above are incurred on the ISP??s own rented network, but data comes from all over the world, and there??s a charge associated with moving data outside one??s own network. Costs depend on the number of ISPs and content providers an ISP peers with, since this saves paying for transit, but the combined costs work out at around £20 per Mbits/sec.

The bottom line

So the total data cost of backhaul plus transit and peering per Mbits/sec per month for ISPs is £150, on top of line rental. That might sound expensive when you consider the average 8Mbits/sec line costs you only £10 or £15 per month, but remember that ISPs bank on that capacity being shared between thousands of users. That??s why the sudden influx of video is causing ISPs major problems.

Back to 'Who's going to pay for the internet?'