Unbundling local access from international broadband access could encourage the development of a more competitive market and a better deal for users, says FX Networks sales GM Jamie Baddeley.
If broadband users could buy international capacity on a “spot market”, they might get it much cheaper, he told a broadband discussion in Wellington last week. It was organised by Unlimited Potential, a forum for developers.
While ISPs work on bundled pricing between the expensive international element and the “relatively cheap” domestic capacity, there is no incentive to develop such a market, he says.
“If I am on my 20GB plan at home and it is about to run out, why can’t I connect to another international provider [represented] in New Zealand who has cheap capacity?” he asked. If that ISP chiefly services businesses, he says they might well have spare capacity in the evenings that they can sell cheaply to home users.
This, he suggests, might be a quicker way of dealing with this country’s international bandwidth affordability problem, rather than a second Pacific cable.
Looking at it another way, the advent of such pricing could crucially affect the economics of a second trans-Pacific cable, such as that contemplated by the Pacific Fibre Consortium, he says. The effect of such a move should be considered before viewing a second cable as a panacea for high internet costs.
A number of attendees agreed that differential pricing would have a positive effect.
Even with a local peering arrangement such as FX Networks has entered into, there is no incentive for an organisation currently hosting data overseas to move it onshore, said one person, because its customers pay for the international capacity as part of their ISP’s bundle, whether they use it or not. Differential national and international pricing would provide an incentive for the move, and thereby benefit the local economy the forum attendee claimed.
Five years ago it was possible to buy a DSL connection with differential national and international pricing, said moderator Steven Heath.
It would in practice be difficult to charge a differential between national and international traffic fairly, believes Pacific Fibre director Lance Wiggs, because much apparently international content is locally cached. “We’ll be making our customers think – ‘gee, if I do this, I am going to be paying more’ - and that is fundamentally wrong.”
He believes that demand for capacity will keep on rising and says it is currently rising by 35 percent a year, while costs fall by 23 percent a year, according to statistics from cable provider Southern Cross. So there is money to be made, he says.
However, to handle future growth “we believe an order of magnitude increase is required in the capacity available to [New Zealand].”
Pacific Fibre is trying to raise $500m and to help this fund-raising process it has to demonstrate demand. Also, it is negotiating with potential technology providers.