International Bandwidth Pricing

[An article]( in the Dominion Post
has Southern Cross Cables claiming that a new cable doesn’t need to be built
since Southern Cross’ pricing is competitive.

They even say that they will sell a 155Mb/s circuit for just $US 500,000 per year down from
6 times that just 4 years ago. Of course half the problem is that their customers
are locked into multi-year contacts so some of them are still paying the old prices.

However even the new prices are still pretty high. The $500,000/year price works
out at around $US 268/Month per Mb/s ( 500000/155/12 = 268 ) or almost exactly $NZ1 per Gigabyte downloaded. In contrast
pricing to Hong Kong, China or Japan is perhaps a quarter of this ( less in bulk) and trans-Atlantic much less. Within the US
I can buy *retail* bandwidth from [Amazon]( for a 3rd of the quoted price.

That sort of huge margin means that New Zealand is going to be stuck with 30GB/month
domestic quotas for a while yet. Even those who use less than that suffer because
ISPs have too keep circuits full to save money so download speeds drop during peak times. It costs so much to host locally that almost all sites are
overseas and thus slower for domestic users.

It also means that newer applications (especially those involving streaming video, audio or other data) are
too expensive for most NZ users ( especially those on mid-range DSL accounts) to
regularly use. Things like downloading TV-shows or Movies via pay-services might cost
more in bandwidth than subscription (not to mention take forever to download).

In reality $5/month per customer is all ISPs can really afford to pay in International Bandwidth prices for
something like a $30/month account. As bandwidth prices drop quotas will go up and perhaps (when bandwidth is cheap enough) go away.

Right now Southern Cross isn’t under a lot of pressure to drops it’s pricing and
it would like to keep things that way. The additional bandwidth going into Australia
and the proposed Kordia cable will put a downward pressure on prices. A casual drop of 20% in bandwidth prices will pay return the governments investment in a year.

In reality to match other country’s cost, bandwidth prices need to drop by at least 75% and then continue dropping. Allowing them
to remain high to protect Sounthern Cross’ profits hurts New Zealand.