NBN: Service to Cost $100 a Month?

There was an possibly alarming report late today in the Australian IT section in regards to the potential for an end user service on the NBN likely to cost in the vicinity of $100 per month.

This “information” comes from Internode – a notoriously anti-Rudd/anti-Conroy ISP – but does hold an element of truth about it. However, I can’t see it costing that much – firstly – who would pay that much?

Currently in Australia, xDSL services cost a minimum of $20.00 per month – this is the deal that most ISPs get from Telstra to access the local copper loop into homes and businesses. This is a direct cost to the ISP that gets passed straight onto the customer.

ISPs then make their money on charging for higher speeds and/or excess data – this is why some ISPs have ridiculously low bandwidth quotas.

But the biggest cost to the ISPs – which also ultimately gets passed onto customers – is international data backhaul.

Given that most content viewed by Australian users on the internet lies outside our borders, the biggest demand for data services is out through international data connections. Australia is currently serviced by the Southern Cross Cable – (via New Zealand and Hawaii to the US west coast) – and a Telstra cable – (via Japan and Hawaii to the US west coast).

That’s not a lot of competition, and this allows these international carriers – within reason – to charge pretty much what they want.

PIPE Networks are about to begin laying their PPC-1 (PIPE Pacific Cable) – which will travel from Sydney to Guam (via Papua New Guinea), and connect directly to the US backbone there. They are already projecting that data carriage rates will be around 50% less than current pricing available from the incumbent carriers.

The NBN will probably require even more international bandwidth – and this could and would only further drive down international carriage costs. So, $100 per month for the NBN? In today’s environment – more than likely. In eight years from now when the project is completed? I doubt it.