There’s been an awful lot of fuss in the last few weeks about “net neutrality” in the UK.
The supposed reason for this is the immediate success of the BBC iPlayer which is eating up bandwidth like it’s going out of fashion. As the iPlayer arrives on the Nintendo Wii, the BBC announces that 42 million programmes have been downloaded in the iPlayer’s first three months. And given that the top programme to make it into the top twenty fell right at the end of the period measured, it’s fair to say that iPlayer is very much still in the ascendant.
The net result of this is that ISPs are beginning to call on the BBC to give them cash to offset the additional costs that the ISPs are facing. In particular, Tiscali and Virgin Media have been particularly outspoken.
Do they have a point? I don’t think they have actually.
The problem is that many ISPs’ business models are just completely broken. Tiscali’s broadband offering, for example, starts at just £6.49. This includes “unlimited downloads” (although their fair usage policy explains that they traffic shape the bandwidth of P2P users during peak times).
The problem is that ISPs such as Tiscali generally rely on BT Wholesale for their ADSL connections. So, unless they actually fit kit in BT exchanges, they have to pay a metered rate to BT Wholesale for the bandwidth their customers use.
Yet Tiscali’s agreesive pricing means that they feel they have to market their product on an unlimited basis.
It doesn’t take a genius to realise that as people begin to want to download more data, the ISPs’ profit margins are going to get squeezed. And it doesn’t help that they’re all in an ultra competitive marketplace where additional services including phone and television services are bundled together at a single price.
Here’s a simple analogy. I decide to open an “eat as much as you like” buffet for which I’m going to charge diners £10 a plate. Overheads aside, some diners will eat less than a tenner’s worth of food and I make money, while some greedy bastards will eat more and I’ll lose money. I have to pitch the price right so that I get many more of the former than the latter.
But if everyone become’s very greedy – we do live in an obese society – and I begin to see diminishing profits what do I do?
I can either up the cost of my buffet, or I can move to a more usual business plan and charge on a per meal basis. I particularly need to take into account how much my supplier charges me for food – and they almost certainly don’t do that on an “unlimited” basis.
ISPs need to bite the bullet if they’re not making enough cash. They need to either charge consumers more for unlimited data, or move to a per GB charge. They could, of course, drop access to high bandwidth sites like YouTube or the BBC. But I’m guessing that few consumers would take up such cheap internet (in)access.
I suspect that if my ISP moved to a per GB charge, that would lead to increased costs for me, although I should say that I’ve used the same ISP for coming on for 15 years now, and although I pay over the odds, I generally believe you get the service you pay for.
If a business plan is unsustainable, then change the business plan.
Otherwise you begin to sound like ITV moaning about how it can’t afford its public service broadcasting obligations yet remaining quite happy to receive its spectrum free of charge (there was a very funny letter in The Guardian on Saturday from Five pointing out all its PSB efforts, and how it was quite happy to continue doing them: “don’t charge us for our spectrum” was what I took from it).