broadband – is flat rate really workable?

The cost and speed of broadband is something which is thrown around quite a lot. Everyone seems to see the grass as being greener on the other side of the fence – or the national border, as the case may be. However, having lived – and had broadband – in three countries recently, is it really so good on the other side?

[Minor update here]

A lot of this stemmed out of one of Rod’s posts about flat rate mobile data and National’s fibre plans, and some interaction with Paul Brislen from Vodafone NZ (ex of IDG / ComputerWorld)

If anyone can point me at a plan for mobile data in the UK or Europe or the US that is actually unlimited for data (and not unlimited* where *=200MB or similar)I’d love to hear about it. I’ve been looking but so far the only one I’ve found was in HK and one of the conditions was you didn’t use it for any kind of VOIP or P2P.

Seriously… Anyone at all? – Paul Brislen

So, given that the UK and US are usually cited in NZ as “great places for broadband which aren’t Korea or Japan”, lets see what the reality actually is.

Fixed Line

Fixed line broadband is exactly what it sounds like – this is the DSL or Cable connection into your house, and I’d include something like WiMax or whatever it is that Woosh uses, because basically, it’s not designed to be moved far.

Internet connections have two components: the speed, and the amount of data you can put thru it. The amount of data you put thru is pretty obvious – bytes sent and received. But speed is highly variable. If I’m a bit further away from the exchange than you are (if I’m using DSL), my speed can be less than yours. But I can be living next door to the exchange and have a slightly dodgy bit of wire in the system, and I don’t get a signal at all. On cable, speed is either just a side issue (ala TelstraClear in NZ), or you pay more for more speed (as with Virgin in the UK, and in Denmark and the US).

And the upstream speed – from me to the exchange – can differ wildly from provider to provider.

On top of that is throttling at the head end (where you connect to the fiber back haul – usually the exchange or a roadside cabinet), and the result is that the published “up to 8 megs” is, well, 100% true – there is no way you are ever going to come close to 8. The last survey I saw said that for DSL in the UK, the top was around 3.5meg (which is what I get, despite the BT website saying I should get 6), with cable topping out a little higher at 4meg/s. All of this on lines which are quoted at 6-8meg/s (DSL) and 4/10/20meg (cable)

Now, in theory, a 3meg/sec DSL connection, if maxed out 24/7, can put thru about 25GB per day. That’s about 750GB/month. And this is where the problem lies – a very very small set of people try to come close to that. If the ISP’s planned for everyone to do that, they would need more bandwidth per head end (DSL cabinet) than New Zealand has for the whole country.

When it comes to how to pay, in New Zealand, you pretty much have two options, but generally only one:

You can get your plan “flat rate“. These are getting less and less common. The theory is, you pay for the amount of bandwidth you need (4meg/sec, 8meg/sec), however in practice, you are in a pool with other “flat rate” users, and you share a specific amount of bandwidth, which makes it slow and rather crappy. On the upside, your bill is always the same.

Because this is advertised as flat rate, I’d guess causes the most problems for the ISP’s PR departments, because the ones on these plans use a massive amount of data, way disproportionate to their numbers or the amount they pay, and complain the loudest when it’s slow. I think Telecom Xtra is the one ISP still offering this kind of pure flat rate plan. These plans are what is common in the US. What you are paying for is basically the SPEED you order – so it costs more for 8meg than 4 meg.

The other side is a metered plan. This means you buy a certain amount of data – usually 2-10GB, but as high as 80 or 150GB – and once you go over this hard limit, either your speed is dropped to something much slower (eg 64k), or you start getting charged at a given rate. Some offer an automatic purchase of data blocks – eg, if you go over 40GB, you get charged $5 for another 10GB, even if you don’t use it all. I’d say that 99% of ISP’s offer this, and 99% of users have this.

I think these plans are attractive to very different people, for different reasons. Casual users are happy to pay less money ($20/month) for a small cap (maybe 5GB), while super heavy home users tend to go for the flat rate plans. Very heavy home users with a clue, however, value the speed of the connection over watching the cap, so tend to go for a high cap metered plan. Personally, I was using around 35-45GB/month in New Zealand, and was on a 4meg, 40GB plan on Telstra cable. My bill was usually at the advertised monthly rate ($80 from memory), tho it sometimes had $5-$10 added.

In the UK, there is also two plans, which are very similar, however the numbers of people are skewed the other way around:

Almost all the ISP’s advertise “flat rate” plans. By flat rate they mean “fair use“, which means there is a hard limit, and if you break it, you get thrown into the naughty user bucket for the next month, with a much reduced speed (usually < 1meg/sec). However, no one can ever tell you exactly (or even roughly) what that limit is. Some say 50GB, but I use around 80GB a month (so sayeth my router, which isn’t reliable, but would be on the low side if anything), and they are still happy with me. 99% of people have this, as I only know of 1 small ISP who offers anything but this.

The other option, which is quite uncommon, is a metered plan as we have in New Zealand. The base caps are usually a lot higher, and the base cost (adjusted) is lower, but the idea is the same. I dont know anyone on one of these plans, but I assume they are out there :)

The flat rate plans are what most people here have, and to be honest, it doesn’t work. The ISP’s have, for a long time, pushed it as “all you can eat”, and competed at the cheapest price. At the top end (of price), there is BT, which costs around £20/month (+phone at £10/month), which is “unlimited”, but throttled from 7pm to about 11pm. At the bottom end is talktalk, which is free (40GB) or £5 (unlimited) if your phone is with them. Most of the ones in the middle – o2, virgin, bethere etc – are about £7-£20/month for flat rate, advertised in big letters at the top of the ads.

There is at least one ISP which offers a metered plan, and for them, it’s a selling point – they point out (correctly) that flat rate doesn’t and can’t work, so they don’t offer it. I’m thinking about moving to these guys when my contract is up, if I can’t get cable where ever I am.

So, flat rate is a sham. What about speed? I live about 2k’s from the exchange, and all the online speed tests (even from BT) say I should get about 6meg/sec, but my router refuses to go over 3meg. It could be my wires (which are new), but as that’s actually the most common top speed available in a recent survey, I think it’s a fix. Add to that some serious packet shaping from 7pm and you have a connection which is unusable in the evenings. I can watch the speed drop from around 3meg to 1meg, or even 700k, at exactly 7pm. This makes the likes of iPlayer unusable, as it needs around 1.5meg to work. Oddly enough, it’s the growth of iPlayer that the ISP’s are claiming is causing the problem. But I digress.

Some ISP’s offer ADSL2+, up to 24meg, but I’ve not tried any of them. I’m told by co-workers that the speed is a lot better – like 10-15Mbps sustained from the likes of Microsoft or Apple.

By comparison, the US – and Denmark, where I was recently – is mostly flat rate, and they mean it. You pay by bandwidth – so a 2meg connection is a lot cheaper than a 8meg one – but there is no such thing as a data charge*. However, there is a lot of press (ok, most of it’s on slashdot) about packet shaping, net neutrality etc, which basically means the ISP’s can’t maintain the flat rate status quo, and are having to slow everyone down. Again, the flat rate model just isn’t working. However, don’t forget that users in the US are a lot closer to around 80% of the internet than anyone else – as most of the servers are in the US, so comparison to them isn’t a lot of use.

*ok, I’m sure some ISP’s offer it, but none I found.

This is all very well and good, but what are people in the US and UK using all this flat rate data for? Well, IPTV is one, BBC iPlayer being the current star, along with “4 on demand” and a few others, and most of the ISP’s (sky, bt, virgin) offer some form of set top box IPTV system. iPlayer is, according to articles, chewing up a massive amount of the UK’s bandwidth, but it’s a trivial thing to route around – push the content out to something closer to the user – think Akami on a national scale – and you have solved most of the problem.

The UK’s largest broadcaster finally launched its online video streaming and download service on Christmas Day. Plusnet, a small ISP owned by BT, has provided a preliminary analysis of the traffic and the results should send shivers down the spine of any ISP currently offering an unlimited “all-you-eat” service. (from Telco 2.0 Article)

The ISP’s win, because their outgoing capacity isn’t being hammered (tho the back haul is still), and the BBC wins because its content is being enjoyed by more people, which is basically its goal in life. As an aside, the UK uses the same model as New Zealand, where BT Wholesale still owns the copper and back haul, and the ISP’s just buy bandwidth from the edge of the back haul into their networks. No wonder Telecom hired the ex-CEO of BT as their CEO!

Legal music downloads (iTunes, 7digital et al) are another big one, but the general bandwidth needed just isn’t close to streaming video. Who would have thought that downloading a CD’s worth of music would be thought of as a low-usage scenario!

VOIP is another big one, tho it needs next to no bandwidth – I have a literally free VOIP line with my BT connection, on which I just pay for calls. But you can almost use VOIP over GRPS, so that’s not really a bandwidth hog.

The other one is the 800lb bandwidth gorilla hiding in the corner of the room – peer to peer, legal or otherwise. Bittorret uses a disproportionate amount of bandwidth, especially upstream, and while usage is going up, it’s still quite niche. Using Bittorrent requires a decent skill level (which is dropping), however other systems are coming on that use the same technique, but for other content – iPlayer and 4OD, for example, started out as a peer-to-peer system, tho it seams few people use it, as the streaming works better. I tried, but I never managed to actually download anything. Streaming just works.

I don’t see a solution, yet, for the peer to peer issue. The P4P stuff, which means your peer client prefers to talk to a more local peer than a remote one, is a good start, but because it’s both decentralized and mostly quasi-legal, putting something organised around it isn’t really feasible. I don’t think this one is going to be solved soon, and it’s going to become more of a problem before it’s fixed.

On a side note, I was talking to a friend in Copenhagen about the internet there. They have almost no DSL, as everyone is on cable, which the government owns and providers put content over. He said he pays about £25/month (around $70NZ, or 250 DKK) for 4mbps, which is totally flat rate, and runs (close to) full speed all day, every day. So there IS real flat rate – just not in New Zealand or the UK.

Mobile

Mobile is really a totally separate issue. First of all, it’s currently seen as expensive and slow, even tho the speeds are not much different to DSL. The second is that most people access the internet from two places – work, or home. For work, their employer provides the connection. At home, they would usually have a phone line, so DSL or Cable makes sense. So mobile usage is really only needed for three categories of people:

• Those who are actually mobile – traveling around from client to client, working out of a cafe. These people exist, but they are quite rare, I think. I know Rod spends (or spent) some of his time doing this, but I’d hazard a guess that it’s actually closer to 10% of his work time – it’s just that 10% is really important to him.
• Those who have decided not to have a land line (and use their cellphone instead), and still want internet access. If they want to use a latency-sensitive app, however – like gaming, VOIP, and maybe p2p – then they need to find another delivery system.
• And finally, those who have a browser on their phone – from some of the basic ones right up to the iPhones almost-desktop browser – and want to surf the web while waiting for the GF to try clothes on, or find out just where the hell they are…. (ie, google maps)

Each one of these has a very different profile, and in both NZ and the UK, they are catered for differently. I’m going to lump #1 and #2 into the same bucket. They need a stable, reliable connection, and should be willing to pay for it, as it’s their primary connection. #3, however, doesn’t need a stable connection, they just want to pass some time, or find out a small bit of information. Their driver is cost – they dont want to have the 5 minutes of down time costing them $20.

For scenarios 1 and 2, they are catered in much the same way – £15/month or $70/month gets you 3 gigs of data in both NZ and the UK. The difference is in what it costs if you go over. Most in the UK are fair use – so you get a warning and then they either cancel your account, or move you to another plan. Otherwise, the overage is £10-20/GB ($25-50/GB). Compare that to New Zealand at $500/GB (50c/MB). Even with the exchange rate conversion, that’s just insane.

However, for casual data – scenario #3 – it gets even worse. New Zealand is around $11.50/MB (yes, $11,500/GB*) for casual data, or $21/month for 15meg then $1,600/GB if you go over. (* had a slight typo there – thanks Stuart!)

Compare that to the UK, where a no-plan casual data (sometimes capped at 15MB per day) is £1, but only if you use it that day, and “unlimited” is £5-7.50/month, with fair use kicking in at 200mb. This even applies to pre-paid accounts.

By fair use, I mean “we reserve the right to cancel your account or move you to another plan if you go over for more than two months” (three, Orange, O2), not “there is a hard limit at 200mb and we’ll charge you if you go over it”.

This is the real difference between NZ and the UK, and something which I believe is stopping growth of mobile internet in New Zealand. In New Zealand, few people use it because they don’t want to count bytes or face the massively insane cost of going over their tiny limits. In the UK, people use it without thinking too hard – on a phone, even a 3G one, it’s hard to hit 50mb, let alone 200.

The US is a totally different kettle of fish. A few of the plans have a cap – for example, AT&T do 5GB for $60 (£30), but they don’t have an overage charge on the website. If you get an iPhone, it’s totally unlimited, and starts at around $20/month including voice minutes/texts. Overage is pretty much unheard of.

So, I think in the mobile space, the UK and New Zealand are kind of similar at the monthly higher-use level – even with the exchange rate, the prices are about the same. But the differences are in the overage, and the fear that comes with the possibility of going over, as well as a total lack of anything real for more casual use. New Zealand overage rates are insane, and there is nothing appealing at the bottom end, where most customers are. I think this is what is stopping any growth in the mobile arena in New Zealand, outside of text messages.

When the iPhone comes out in New Zealand, it’s going to be interesting. The usage stats thus far show that normal mobile phone users use around 90% voice and 10% data. On the iPhone, it’s around 80% data and 20% voice – and at current changes, a monthly iPhone bill is likely to be more than the cost of a new iPhone. At present, it’s dead in the water, unless either of the cellco’s do an iPhone plan, with sensible data allowances and sane overage.

Summary

I think, in NZ, that the fixed-line vendors have things mostly worked out. The model is fair, and sustainable, unlike both the US and UK markets. Customers can avoid getting a massive bill for an accidental overrun, and the ISP’s can control their bandwidth bills.

In the mobile space, the fear of the cost of overage is holding back the market, and ironically, it would most likely make the mobile providers – Telecom and Vodafone – even more money if they dropped the overage charges to sane levels.

In my opinion, I think a couple of things need to be done. The first is that mobile internet needs to have sensible overage and some flexibility in charging. I think the UK basically has this right. It’s both sustainable and doesn’t give the customer the chance to force themselves into bankruptcy.

For fixed line data, I think NZ has it right for international data, but national data needs to be free. The cost of national data is pretty much zero, and as ex-wired editor Chris Anderson in his soon-to-be-published book “Free” points out:

That meant software writers, liberated from worrying about scarce computational resources like memory and CPU cycles, could become more and more ambitious, focusing on higher-order functions such as user interfaces and new markets such as entertainment. And that meant software of broader appeal, which brought in more users, who in turn found even more uses for computers. Thanks to that wasteful throwing of transistors against the wall, the world was changed.

What’s interesting is that transistors (or storage, or bandwidth) don’t have to be completely free to invoke this effect. At a certain point, they’re cheap enough to be safely disregarded.

I think this would stimulate a lot of local growth and local apps, and when you consider that iTunes is a local application – Apple uses Akami as a CDN (Content Delivery Network), and Akami has servers at all the major Telco’s in New Zealand – the game changes for music, tv, movies, and anything else, really. It might get the ISP’s back at the peering table, which wouldn’t be bad at all.

It’s not like we are short on great talent in New Zealand, either. Imagine what people would come up with in their bedrooms, trying to sell a heater – oops, that’s another story – if they could host it locally and know that local people could use it at a high speed. NZTube anyone?

Russell Brown had this to say on his Hard News blog, which I think sums it up nicely as to what happens if people can use bandwidth without having to worry if they are going to have their bank accounts cleaned out:

What would we do with this huge new bandwidth? Having entered the screen production business, I can think of what I’d do. There’s a hell of a lot of sneakernet still going on now. Being able to edit video and send it to and from a production location instantly would work for me. There’s the inevitable, but real, invocation of telecommuting. The health and education sectors would readily find applications. I don’t think anyone’s begun to explore the potential of distributed computing. Basically, if you build it they will come.

Here-here, Mr Brown. Build it, and price it right, and they will come.