'Unlimited’ broadband dead in the water: iiNet, iPrimus

iiNet chief executive, Michael Malone, has come out with a definitive statement on the recent emergence of unlimited broadband plans in Australia: they’re unsustainable and can’t work.

Speaking to Computerworld Australia, following the launch of the internet service provider’s one terabyte plan, Malone said unlimited plans, as offered chiefly by Optus and AAPT, were doomed to extinction.

“I’ve looked at the numbers on [AAPT’s unlimited plan] and that it is going. We’ve said publicly that it is going to be gone that day we take over,” Malone said, referencing iiNet’s recent agreement to acquire the consumer division of the New Zealand Telecom owned telco.

“On AAPT’s cost base they lost money [on the unlimited plan]. iiNet’s cost base is a lot less than AAPT’s and they are still drastically loss-making.

Malone claimed a number of AAPT’s unlimited plan users had openly bragged about downloading three to five terabytes per month on ISP community forum, Whirlpool.

“When other [users] say, ‘you’re ruining it for the rest of us’, [the heavy downloaders’] quite correct response is, ‘we’ll, I paid for unlimited, so I’m going to use it,” he said.

Primus Telecom chief executive Ravi Bhatia, echoed Malone saying that the same arguments informed the ISP’s recent decision to offer 1.1TB fixed plans.

“You look at any unlimited plans out there from anyone, they always have so many limits on the unlimited plan, and you laugh at that. It’s a joke,” he said.

“Ok this is an unlimited plan but you must conform to this formula and the moon must be full… and it must be the 14th of December. It’s ridiculous.

What I’m saying is the consumers, they laugh at it, we should come out in the open and say that is what we will deliver. We are dealing with customers and we are not in the business of deceiving our customers people who do that won’t last long. It is wrong."

iiNet’s Malone said the absence of the viability of unlimited broadband plans in Australia, as well as the rest of the world, could be seen when looked at from a simple business perspective.

“If one player in the market offers 100 gigs for $50 and someone else comes out and says they’ll do unlimited. You can’t do it for the same price as you do 100 gigs, so you have to do it for, say, $80. Who is going to go there?” he said.

“A family that is using 10gigs off their 100 gig plan is going to pay an extra $30 to get unlimited? No. The only people who will pay the extra are those who will absolutely cane it. Inevitably that’s what happens.”

Malone claimed the movement by some local ISPs to unlimited plans was an aberration as the global trend was seeing movement from unlimited plans back to capped plans.

“The net neutrality debate in the US, in particular, and in the UK, kind of illustrates the basic problem here,” he said. “You have three parties that can pay for data over the traffic – the network owner, the customer, or the content provider.

“When you have an unlimited download environment the consumer increases their usage then the content owner and network owner bitch at each other over who is going to cover the cost of that. We don’t have that issue in Australia as the cost of incremental traffic is borne by the consumer who gets the most utility from it.”

“If you increase speeds up indefinitely something has to be capped. Look at the NBN now with [NBN Co CEO Mike] Quigley saying they are trialling and getting 1Gbps. Are we really going to offer unlimited downloads on 1GBps connections?”

Malone said the way this challenge was addressed overseas was through speed limiting, rather than download limiting. In contrast, iiNet would look to deliver the highest possible speeds, but limit those with download caps.

“If you look at the underlying costs of operating a network, the part that costs you is the data. The speed at which we can reach your house doesn’t cost us any more. So, ultimately prices should reflect underlying costs.”

With reporting by Chloe Herrick

Copyright © 2010 IDG Communications, Inc.

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