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Broadband users in New Zealand have long looked enviously at their counterparts in Australia where monthly data quotas are much larger and costs per gigabyte much lower. Now a study by market research firm Market Clarity has revealed that Australian ISPs actually pay more for connectivity and capacity than the Kiwis, and it is lack of competitive pressure that is keeping New Zealand prices high.

After all network costs (network access, domestic backhaul and IP Transit) are taken into account, Market Clarity found that Australian retail broadband ISPs retain a median profit margin of 26.3 percent of ARPU, while New Zealand ISPs have a median margin of 38.8 percent of ARPU.

New Zealand respondents to Market Clarity's survey spend around $A26.07, or $NZ33.50 per customer, per month on network costs (network access, backhaul and IP transit); Australian respondents spend $A37.54, or $NZ48.24, per customer, per month on total network costs.

The study, Understanding the Trans-Tasman Broadband Value Gap: ISP Costs in Australia and New Zealand, http://www.marketclarity.com.au/documents/market-clarity-understanding-the-trans-tasman-bb-gap-30-may-2012.pdf based on interviews with retail ISPs on both sides of the Tasman, also found that Australian ISPs devote more ARPU to wholesale service costs (such as ADSL access services, domestic backhaul, and IP Transit) than their counterparts in New Zealand.

"The results are surprising," said Market Clarity CEO Shara Evans. "There is a widespread perception, particularly in New Zealand, that the costs of international services drive the difference between the allowances offered Australian and New Zealand broadband customers.

"However, our research suggests that other factors are more significant. These might include the different domestic regulatory regimes in the two countries, and the competitive pressure brought about by Australia's much larger number of retail ISPs."


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Market Clarity's analysis of ISP costs is based on interviews with Tier 2 and Tier 3 ISPs delivering residential broadband services, and analysis of questionnaire responses. Tier 1 carriers were excluded because of their considerable infrastructure investments, and their status as wholesale suppliers to lower-tier providers. The study focused on the provision of residential ADSL services "so as to ensure the comparability of results between different ISPs, and between Australia and New Zealand."

The high cost of data, and the relatively low monthly quotas in New Zealand have long been a sore point and the study confirmed significant differences. Median quotas in Australia were 115GB per month and 25GB in New Zealand. However the study reported: "Surprisingly, Australian median consumption per-customer, at 19.9GB per month, is only 6.4GB per month greater than New Zealand customers."

In a recent TUANZ blog post - headed 'Data caps are evil and must be destroyed' - CEO Paul Brislen, said: "We suffer from incredibly low data caps and as one of only a handful of countries to enforce such things (alongside those broadband giants, Canada, Australia and Iceland) we end up hiding the true cost of our monthly broadband plans…And as we move to that fibre world we need to drop these ridiculously low caps. 5GB a month is hopeless, 10GB barely any better.

In similar vein, last December InternetNZ CEO, Vikram Kumar, blogged: "Back in August 2010, I mused in a blog post that while fibre will deliver faster last-mile broadband speeds for urban dwellers, many of these people are unable to take advantage of the broadband speed they already have…Since then, most ISPs have increased their data caps.

"As a percentage change, the increases have been large. For example, Telecom doubled the cap on all its smaller and medium sized plans. TelstraClear was a later comer to the party. They are now cutting monthly costs which gives customers more data for the same monthly price, eg $NZ96 per month now gets 90GB instead of 60GB…The parent company, Telstra, in Australia provides (converting to New Zealand dollars) 200GB for $NZ90 and 500GB for $NZ115. So for our $NZ96 we get about a third to a fourth of the Australians, even after TelstraClear's current 50 percent increase."

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