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ISPs "exaggerate the cost of data"

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By Barry Collins

Posted on 7 Oct 2011 at 10:33

ISPs are over-egging the costs of meeting the ever-increasing demand for data, according to a new report.

Both fixed and mobile providers have claimed that increased internet traffic has resulted in "ballooning" costs for networks. Some ISPs have argued that content providers should pay them to help meet the cost of supplying bandwidth-intensive services such as the BBC iPlayer.

However, a new report commissioned by content providers - including the BBC, Channel 4 and Skype - claims the costs of delivering additional internet traffic have been wildly exaggerated by the ISPs.

For fixed networks, traffic-related costs are low, falling on a unit basis and likely to fall overall

"Traffic-related costs are a small percentage of the total connectivity revenue, and despite traffic growth, this percentage is expected to stay constant or decline," claims the report, written by telecoms experts Plum Consulting.

The report claims the cost of delivering additional gigabytes of data are mere pennies. "Studies in Canada and in the UK... put the incremental cost of fixed network traffic at around €0.01-0.03 per GB."

The report concedes that the cost of adding capacity on mobile networks "are significantly higher than they are for fixed networks" because "the radio-access network is shared by users".

However, it claims forthcoming 4G technologies will significantly reduce those costs. "Forward-looking estimates which take account of the transition to LTE [Long Term Evolution], additional spectrum and traffic subscriber growth... puts the cost to the mobile network operators at under €1 per GB," Plum Consulting claims.

As the report states, that cost is "well below existing smartphone data tariffs of around €10 per GB".

Describing claims of ballooning costs as a "myth", the report concludes that "for fixed networks, traffic-related costs are low, falling on a unit basis and likely to fall overall given declines in traffic growth and on-going cost-reducing technical progress".

Mobile network data costs are also "declining on a unit cost basis".

"Rubbish" figures

ISP representatives claim the figures quoted in the report are inaccurate. "The reality is bandwidth is shooting up," said Trefor Davies, CTO of communications provider Timico and a member of the board at the Internet Service Providers' Association (ISPA). "Bandwidth is by far the greatest proportion of cost for an ISP."

Davies said this is especially the case for smaller ISPs who rent lines on a wholesale basis from BT. "It's very much you pay for what you use," he said. "If you use twice as much bandwidth, you're going to be paying twice as much."

Even for ISPs running their own network, such as BT, Davies claims the figures of €0.01-0.03 per GB are "rubbish". "It's an order of magnitude greater than that," he claimed.

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User comments

Any comments from the mobile networks, yet?

By The_Scrote on 7 Oct 2011

Bargain

"well below existing smartphone data tariffs of around €10 per GB".
Then my PAYG deal is even better than I thought.

Top up £15.00, buy the All In One £15.00 and I get 'unlimited' data.

So far it has been properly unlimited. I use it tethered and download well over 100G per month on it. Even without the 300 mins and 3000 texts, it's still a bargain.

By synaptic_fire on 7 Oct 2011

Over exaggerate?

Not just exaggerate? Seems a bit recursive to me.

By JohnHo1 on 7 Oct 2011

@JohnHo1

Fair point - will amend headline.

Barry Collins
Editor

By Barry_Collins on 7 Oct 2011

ISPs in bulls**t shocker!!

It's not exactly out of character is it?

By renhoek on 7 Oct 2011

What a surprise!!!!!

The companies that fund the research, get the result they want out of the report.

Unless the research is completely independant, whats the point?

By andy_fogg on 7 Oct 2011

ISPs in bulls**t shocker!!

It's not exactly out of character is it?

By renhoek on 7 Oct 2011

ISPA disagrees saying it's more...

Somehow that's not surprising.
Neither is it surprising that they don't say how much the data 'really' costs...

By greemble on 7 Oct 2011

Amazon S3 Pricing

Amazon S3 costs 12c per Gb for small amounts of data dropping to 5c per Gb at the Petabyte level so I assume this is close to the wholesale cost of data xfer.

By milliganp on 7 Oct 2011

Traditional Gouging

ISPs in most parts of the world gouge costumers with no mercy. Actual costs of their investment, bandwith expansion, etc, are hundreds of times below the profits they are making with their metered systems - but they will keep doing that for as long as customers continue to bend over and take it.

By arthur_cabot on 7 Oct 2011

Unlimited...

I've had unlimited broadband since I moved to Germany in 2002.

When I was an active tester to SUSE, I would get through 400-500GB a month in downloading new alphas and betas and patches. That was on my ISDN + ADSL line, flatrate voice and data.

20€ a month rents a webserver with 5TB of included monthly data volume. Over that volume, you pay a few cents per GB or the bandwidth is reduced.

By big_D on 8 Oct 2011

The ISPs argument is contradictory. If bandwidth usage is going up, then the cost per GB should come down. There is no linear relationship between quantity and total cost, and no reason why bandwidth should be any different.

Good that synaptic_fire has posted a positive example!

By halsteadk on 8 Oct 2011

Unlimited mobile internet for £10/month!

Giffgaff can give you unlimited mobile internet for £10 and still be profitable. Only problem is that you'll have to buy your own handset.

What we need is this kind of competition to force other ISPs and networks into looking into their pricing.

By jagdipa on 10 Oct 2011

Wifi and Satellite Internet

Why is noone here talking about Wifi or Satellite internet? Doesn't anyone see that coming? What's going on? It feels the same to me as solar was so long ago - not very likely to meet capacity. But its limitless and maybe progress doesn't have to sit idle again?

By amateur101 on 13 Oct 2011

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