Information, and access to information, continues
to be the key driver of growth and development of the information
society and the knowledge driven economy. This in fact is
becoming vital not only for businesses who need quick, easy
and inexpensive transfer of data but also for individuals
whether they want to buy the latest best seller or conduct
transactions with banks or the Government. The market for
Voice and Data is undergoing enormous changes and higher bandwidth
services are increasingly required if businesses are to be
able to maximize their full business potential and individuals
to take full advantage of the information age for example
via high-speed Internet access.
Industry players have identified that:
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Higher bandwidth services are vital
in building a digital future and in particular for the
development of electronic commerce and other electronic
services to users.
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Higher bandwidth services enable more
information to be delivered at higher speeds to the end
user. In many cases, higher bandwidth is essential if
there is to be efficient interactivity between the services
being provided and the consumer. It will facilitate the
development of new multi-media services that make use
of the greater technical capabilities.
The industry has recently seen the emergence
of new alternative carriers mainly offering high bandwidth
and incumbents have also woken up to this trend in order to
respond to the harsh competition.
Who supplies high bandwidth?
As a result of its worldwide tariffs research,
analysis and implementation for its pricing tool ‘netVESPA’,
Magenta netLogic has found the following:
From the 59 incumbent operators researched,
only 17 publicly publish tariffs for 140/155M and 1 for 622M.
So far none publish prices for STM16.
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17 out of
59 offer high bandwidth
tariffs outside US |
Incumbent Operators offering High Bandwidth Tariffs
Pricing from alternative carriers is highly
secretive and they do not publicly publish their tariffs.
Magenta netLogic has however had the opportunity to analyze
tariffs from 21 alternative carriers provided by its customers.
17 of them provided tariffs for high bandwidths. It is clear
from the prices provided that these operators are mainly interested
in supplying high bandwidth to meet the increasing demand.
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17 out of
21 offer high bandwidth tariffs |
An Example of European Alternative
Carriers offering High Bandwidth Tariffs
High bandwidth pricing structure
Since the collapse of Iaxis, carriers are
striving to hit revenue targets meaning operators make small
margins if any at all. The newer alternative operators are
less concerned with profit margin than their incumbent counterparts
and are concerned mainly with market share, encouraging them
to offer bandwidth at knockdown prices. The operators’
concern is now to stay within the market value whilst offering
the best possible quality of service.
From the study of the 17 incumbents offering
high bandwidth, the pricing structures are the same as for
smaller bandwidths and will include the same level of tariff
intricacies.
Alternative carriers have in general adopted
a much simpler tariff structure, which is in most cases composed
of a fixed price irrespective of the on-net location of the
customer sites. There are however few variations such as:
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- Distance-based
- Fixed and specific prices between cities.
Both types of operators offer term and volume
discounts. However, it is more frequent to find alternative
operators offering discounts schemes than incumbents. Additionally,
discount structures tend to be much simpler than those of
incumbents.
Customer loyalty is nonetheless lacking as
only 33% of STM1 contracts exceed 1 year. Shorter contracts
enable buyers to follow the rapidly changing market, which
itself contributes to the overall decline in prices.
The Future of broadband pricing
Pricing will be influenced by increasing
competition, the emergence of further new entrants, new alliances
and the constant development of new technologies. As such,
one can predict important changes in such a dynamic environment:
- High bandwidth prices are likely to decline.
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New pricing structures put into place
such as ‘Route pricing’ i.e. price determined
by competitive routes, which is been adopted in Europe
such as London–Paris, London– Frankfurt.
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‘Just-right pricing’, identifying
a method that would be fairer to the user and still profitable
for the operator.
Incumbent operators may need to develop broadband
tariffs to meet the needs of a competitive market and new
entrants may need to develop competitive broadband tariffs,
which maximize the return on their infrastructure investment.
Elisabeth
Rodrigues Simão
Telecoms Tariffs Director
Magenta netLogic Ltd |
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