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Half truths or a cover up?

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Half truths or a cover up?

I'm very confused over this debate about heavy users being subsidised by the majority of other users. Something does not ring true.
I can think of no other business that willingly has customers that they make a loss from.
Think about it, what would be the point. My milkman wont deliver 5 pints to my house for the price of of 3 just because he makes a profit on every body who has 3 pints. Pubs don't subsidise heavy drinkers by charging them less than the cost of the beer .
Something is wrong here, there is more to this story than is being told. There is no way that any company would operate like this. Any customer that cost money rather than made money would either be charged accordingly, or said goodbye to.
Business's are not charity, they exist to make a profit. Nothing can convince me that they would tolerate substantial losses from a small percentage of users just because the rest were profitable. The management of Plus-Net are not idiots, neither was I born in a cabbage patch, so just what is going on here? What is the truth?
7 REPLIES
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Re: Half truths or a cover up?

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Something is wrong here, there is more to this story than is being told. There is no way that any company would operate like this. Any customer that cost money rather than made money would either be charged accordingly, or said goodbye to.
That is exactly why they are taking this action - they cannot sustain the usage that they have been experiencing by the heavier users. As regards providing a service long term, which, when looked at individually, appears to cost the company money, you must remember that they look at the overall picture of all the user base, to see if the products provided make money overall. Regardless of whether each individual provides a profit or a loss, it is equally as important to have users that provide a regular, known income (esp. over the longer term - hence the preference for annual contracts), that enables the business to do acurate, long term financial forecasts.
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Re: Half truths or a cover up?

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you must remember that they look at the overall picture of all the user base, to see if the products provided make money overall. Regardless of whether each individual provides a profit or a loss.

This is my point, business's do not operate like this. Loss makers would be weeded out and charged a viable rate, or disposed of. There is no way that they be kept just because the rest made a profit. Heads would roll if this was company policy. That is why I suspect that there is more to this than is being told.
Community Veteran
Posts: 6,111
Thanks: 1
Registered: 05-04-2007

Half truths or a cover up?

And as Yorkie has said, that's exactly why PlusNet are taking this action - because they've had enough of the people using massive amounts of bandwidth! There's no conspiracy here...

Thomas
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Half truths or a cover up?

There is also a FAQ on the subject in Customer Feedback, although you may have already read this, hence your original posting.

Aaron
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Half truths or a cover up?

O.K. I read the FAQ. Clear as mud.
Could you tell me if my understanding is correct.
Each GB costs x amount. If you use more than you pay in then you are a net loss, a liability to PlusNet.
If you use less than you pay in then you a net profit, an asset to PlusNet.
Or does it not effect costs no matter how much or little you use, just that heavy usage effects the service.
If it's the latter then it all becomes a lot clearer.
Thanks.
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Half truths or a cover up?

Hi,

Each GB does cost x amount, it's roughly about a £1 I believe but I could be wrong.

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Each GB costs x amount. If you use more than you pay in then you are a net loss, a liability to PlusNet.

In a black and white sense then yes.

It does matter how much you use and your usage patterns as well. If you downloaded 100GB, you effectivly costing Plus Net £100.

Usage patterns matter because if your on a 50:1 ratio, then your sharing your connection with up to 50 other people. If you max out your connection all the time, then your taking more than your share of the line. However since Plus Net have been upgrading their pipes on a regular basis to ensure spare capacity, the effect of this heavy use has been minimal.

However if costs should rise, then it maybe more difficult to maintain this spare capacity and thus speed would be affected. In addition the costs are increasing, so from a business sense you can see why this action was taken.

Aaron
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Half truths or a cover up?

You have that pretty much clear.

Costs on a per GB scale are around £1. We can calculate a much closer cost, but it is pretty much near enough to show the scale, give or take 2%.

One small snag is that these costs are only for the data transfer from the ISP to the user, and do not include the rental of the per user port, the setup costs, activation or any ISP related costs to be passed on. They are purly the cost to the ISP from BT on the transfer pipes.

It has always operated on a system of overselling, where there is a fine balance between profit and loss.

Lets take 2 example 512Kb users, one using the average 6GB per month, and the other using transfer to the tune of 140GB (EG, a 0.3% user).

The transfer costs for the lite user are £6 per month, whilst the heavy users is costing the ISP £140 per month.

For the record, BT charge £8.40 for each user the ISP has on rental costs.

From this, we now know that the ISP is getting £7.59 from the lite user, after wholesale costs. From this, they must make a profit, as well as pay staff and the rest of it.

Now before we even factor in the port rental, we already know the ISP is making a loss on the heavy user. Forget even breaking even.

All ISPs oversell in this way, where come of the incoming from the lite user, is being placed of supporting the heavy users.

The problems arrise when more and more people that are heavy users start to arrive. It isn't so much the threat to profits that causes the ISP to look sharp as PlusNet has done, but the fact that it doesn't just stop at the threat.

Heavy users will eat very quickly into those profits, and the more that come, the more the risk of moving into loss, having to place caps or even going bust arrises. Such actions by ISPs are more preventative than anything.

People say ISPs are only concerned about profits. All I can say is so. Isn't that what businesses are setup for? To make profit.

I am pretty much sure those saying that would be bothered about there wage being eaten into each week. IE, if your company started deducting utility fees used by the employees. All coffee, water, soap and even toilet paper.