## What is the true cost of bandwidth on Premiere accounts?

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 8:46 AM

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As a long time customer of plusnet (since September 2000), I've been sat on the sidelines and watching how Plusnet has been changing.

I think a lot of what has been going on is hot air and nonsense by people not taking the time to read all of the literature which has been presented to them.

However I'm curious for an exact costings of how much bandwidth truly costs. I personally am on Broadband Premiere (up to 2mb). What I'd like to see is an exact costings breakdown of where the £21.99 goes eg bt line rental / profit / bandwidth costs). I'm quite sure that Plusnet does have such information as they would have had to work out what a sustainable price is in the first place to actually come up with those prices. I've seen astronomical figures of £155,000 quoted for BT central pipes though how much of that per customer do we pay?.

So lets see....

BT ADSL line rental -> £8.64

Cost of bandwidth (our 20GB clean allowance) -> ?

The left over money which pays for staffing etc -> ?

VAT -> ?

Grand Total -> £21.99

Someone care to fill in the gaps for me ? :]

In light of the answer I'd like to ask Plusnet this...

I'm currently renting a Virtual Dedicated Server from a provider in the states. It's got 10GB HDD, 256mb guarenteed RAM, shared access of a 100mb port, (I've seen my server outputting in excess of 4,000k/s compared to a paltry 30k/s on my DSL line) and a monthly allowance of 500GB completely clean / non traffic shaped bandwidth. That is costing me a grand total of £19.73.(per month)

It would be reasnoably safe to say that pretty much for the same amount of money, I'm getting 20GB clean bandwidth from plusnet and 500GB clean bandwidth from my server provider.

So I understand that it's a different type of market eg hosting services vs home dial up but why can't Plusnet in it's costings afford to give it's customers a greater amount of clean bandwidth before applying traffic shaping ?. Something at least from my perspective doesnt add up.

I understand that broadband isn't an all you can eat, nothing is like that these days. I accept that high usage customers need to be dealt with eg once you start getting above 50GB you're starting to take the mickey but at least from my perspective I don't understand why if I can buy 500GB's worth of bandwidth for that amount of money that plusnet couldn't afford to be a little more generous with it's unthrottled bandwidth maybe 30 - 40GB's ?.

I await a response to this with interest.

Regards

Craig Henry

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 10:10 AM

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 10:47 AM

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Port cost - £9.87

20GB clean allowance - 0.478 x 20 - £9.56

Staffing/other costs/profit - £2.56

Grand Total - £21.99

So in real terms with the £21.99 the clean allowance of broadband is what you actually pay for. Once you go over the 20GB you're eating in to the profit / whats left over to pay for extra costings and hence once the 20GB is exceeded you instigate management measures because you're using what you havent actually paid for.

However 2 questions arise from this -

1) You obviously buy central pipe capacity in relation to the amount of paying subscribers that you have. However those costings assume that the pipe will be running at full capacity all of the time.

However this is not the case and theres some slack capacity in the network. Therefore you don't need to have central pipe capacity which matches the number of subscribers x maximum possible line speed. You maybe only need to have central pipe capacity equivalent to 60 - 70% of the total active subscriber bases total combined througput.

This would therefore lower the cost per GB wouldnt it?. Hence if there's a lower cost per GB wouldnt that therefore mean that plusnet could afford to give a larger clean allowance of bandwidth?

And yes I do agree that you are within your rights to start applying management to connections have used in real term more bandwidth than what they have actually paid for.

2) Why are BT central pipe costs so high compared to the ridiculous amounts of bandwidth that you can buy at low prices from US hosting providers?

Regards

Craig Henry

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 11:35 AM

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Quote

2) Why are BT central pipe costs so high compared to the ridiculous amounts of bandwidth that you can buy at low prices from US hosting providers?

I posted a little something of relevence here and since then I found a reference that indicates that, in this moronic country of ours, lit fibre pairs can have a "rate" of about

*applied to them :!:*

**£1000 per kilometre**Edit: http://www.itweek.co.uk/itweek/comment/2140206/fibre-tax-blocks-bt-rivals

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 12:08 PM

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 2:10 PM

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Central Pipe Costs

===============

Each BT central pipe costs £1,758,693.00 per year.

At this time 18 out of the 20 segments are active which therefore equates to £7,914,118.50 per year

This therefore equates to £659,509.88 per month for the current capacity.

Cental Pipe Capacity

================

Each BT central pipe has a capacity of 3,677,686GB per year

18 out of 20 segments active euqating to 16,550,487GB per year

Therefore 1,379,207.25GB throughput per month.

Theres therefore works out to 0.478p per GB.

Some preamble about different account types

===================================

This disregards the higher grade BB+ accounts and Business/SDSL products.

I am assuming here that bandwidth costs of the subscription are based upon the "clean" or included allowance which is included in your subscription is what you actually pay for in your subscription cost. Eg for Broadband Premiere you have 20GB clean alloance so 20 x 0.48 and then add post costs and staffing costs to get the £21.99.

BB+

Assume 5GB of bandwidth

9.87 Port cost

2.40 Bandwidth

2.72 for staffing etc

PAYG

Assume 10GB bandwidth

9.87 Port cost

4.80 Bandwidth

5.32 for calls+staffing etc

Premiere up to 2mb - 20GB

9.87 Port cost

9.60 Bandwidth

2.52 for staffing etc

Premiere up to 4mb - 30GB

9.87 Port cost

14.40 Bandwidth

5.72 for staffing etc

Premiere up to 8mb - 40GB

9.87 lPort cost

19.20 bandwidth

10.92 for staffing etc

Some preamble about estimated customer numbers

=========================================

In the Sep 2005 Plusnet states that it has 137,827 customers and they are averaging net additions of 8,000 a month

Therefore in Jan 2006 I'm estimating 169,000 customers.

Estimation of money collected by Plusnet to pay for Bandwidth from each Plusnet customer.

=========================================================

Below I've made some rough estimates of the current spread of customers who are on each product type. Of course the ACTUAL numbers Plusnet won't divulge as thats a corporate secret but you can make estimations.

Bear in mind that the figures below are based soley on the estimated bandwidth portion of the subscription and don't include the staffing cost portion or the port cost.

Money from customers collected to count towards bandwidth costs based on the figures given above.

10% are still dialup - 6,900 thereare don't count these people

5% are 8mb - 3,450 therefore 19.20 a month x 3,450 = £ 66,240

5% are 4mb - 3, 450 therefore 14.40 a month x 3,450 = £ 49,680

15% are payg - 25,350 therefore 4.80 a month x 25,350 = £121,680

15% are plus - 25,350 therefore 2.40 a month x 25,350 = £60,840

50% are 2mg - 84,950 therefore 9.60 a month x 84,950 = £815,520

Therefore based on my calculations Plusnet could in theory be collecting the best part of £1,113,960

(Note these figures don't include higher grades of BB+ accounts or business customers so the figure could be more).

So Plusnet has a monthly central pipe cost of £659,509.88

The collect from their customer base for bandwidth £1,113,960 (estimated)

Theres works out as a cost per GB of 47.8P but they are collecting from their customers in total an estimated average of 80p per GB.

Therefore my question would be whats happening to the other £454,450.12 that you are collecting each month from the bandwidth portion of the subscription if your BT central pipe costs are already more than satisfied. This would equate to approximately £5.4 million pounds per year over and above what is required to pay for your central pipes.

In light of this again I ask the question, why can't plusnet allow for a greater amount of clean unrestricted bandwidth either by making use of the current network infrastructure or by adding more central pipes ?

Regards

Craig Henry

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 3:39 PM

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I don't have the exact percentage splits to hand, but I think you are over-estimating the 4 & 8Mbps products quite considerably (probably less than 1% between them rather than your estimate of 5% each) and the Plus and 2Mb Premier numbers are probably a lot closer together in numbers. As at the end of December there were 47,606 Plus Customers, see here and probably a little over 50,000 2Mbps Premier (it was 47,800 in October from here.) I've also put all the PAYG, Home Surf, Business and Teleworker in togther although they will all be split.

So based on 160,000 ADSL customers and rounding the figures a bit.

4 & 8mb - about 1600 therefore (14.40 + 19.20)/2 a month x 1600 = £15,360

PAYG/Home Surf/Business - 56,400 therefore 4.80 a month x 25,350 = £270,720

Plus - 50,000 therefore 2.40 a month x 25,350 = £120,000

2mg Premier- 52,000 therefore 9.60 a month x 84,950 = £499,200

Which comes to £916,800, which equates to a difference of £257,290.12. Discounting VAT it's £218,970.31. Remember also that it costs £175,000+VAT to activate a new central pipe and that this is where the profit will come from.

(Note the figures aren't exact and are just estimates based on previously published figures but I think they illustrate your calculations a bit more accurately).

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 3:55 PM

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Also for your info Stew is working on a detailed posting about how we manage capacity and how we budget for bandwidth that we'll turn into a website page. Expect to see that in the coming days.

Thanks

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##### What is the true cost of bandwidth on Premiere accounts?

##### What is the true cost of bandwidth on Premiere accounts?

22-01-2006 5:00 PM

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That should also give an insight in to costs, profit margins etc.

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