Tuesday, August 05, 2008

Singapore - ISP's to customers - "You are evil"

On Monday, The Straits Times ran a half page shill piece for the ISP's on the front of the Money section.

The gist of the article is that some unspecified "bandwidth hogs" with "insatiable appetites" are ruining it for everybody else by consuming more than their fair share.

The article attempts to equate using the Internet with consuming more than one's fair share of water. This is emotional manipulation of the worst kind. Clearly the ISP's are getting ready to try and introduce volume-based pricing in Singapore, and they are using all their press contacts to smooth the way. The article even trots out the argument that it isn't price fixing and collusion if all the ISP's coincidentally introduce volume pricing.

Except data isn't water, and there is no shortage of bandwidth. The world still hasn't consumed most of the fibre capacity that was installed during the dot com boom, and new technology continues to increase the capacity of the fibre optic pipes.

The whole comparison to water usage is a deliberate attempt to mislead.

The standard telecom contract for data services has been based on bandwidth provided since the invention of data circuits. Indeed, the ISP's price their services based on the bandwidth to which one subscribes. If I have subscribed for an 8Mb/sec service, how can I be a "bandwidth hog" for using 8Mb/sec of bandwidth? I paid for it, and I have the right to use it.

Let's dump the adjectives and get down to what is really happening.

The ISP's in Singapore have been selling ever greater bandwidth packages to consumers, confident in their belief that nobody can actually use that much capacity. At the same time, they have also under-provisioned the bandwidth required to connect all those subscribers to the rest of the world, which explains the incredibly slow performance one suffers with on a daily basis when accessing any site outside Singapore.

With organizations like the BBC discontinuing short wave transmissions in favour of Internet broadcasts, the popularity of video sharing sites like YouTube, and the wide-spread use of gaming, the Internet has matured into a rich media network.

Actually that is what it is supposed to be, but in Singapore we only get a frustrating hint of what is possible because of the lack of international bandwidth provided by the ISP's.

The problem is not "bandwidth hogs", it is the lack of capacity installed by the ISP's. I can't watch YouTube, listen to the radio, or download files without interruptions and dropouts. When I measure the local loop capacity, there is indeed 8Mb/sec of capacity. But that rapidly disintegrates into a high-latency, high packet loss mess as all the subscribers who are already paying for service find themselves dumped into congested and under-specified international gateways.

In case you think I am being unduly harsh on the ISP's, and that they need to charge by volume in order to stay in business, let's have a look at an answer given during the Q1 2008 results meeting with investors held by Starhub. (I don't mean to pick on Starhub, all the ISP's are doing it, but I know this comment took place because I was listening)

StarHub -"Keep in mind that the data and Internet service is provisioned over an existing fibre optic network system. All the CAPEX is laid in, most of the capacity is laid in, so when we sell a bit of bandwidth on that fibre optic system, it delivers very high margins. You’re talking about gross margins that are in excess of 80%. The encouraging thing is, as Mike pointed out, there has been a very steady growth in the very high margin in the data internet business. In fact now the revenue for that part of the business almost equals to the revenue in prepaid, so it has become a very meaningful part of our business."

So "No", Straits Times and local ISP's, the problem is not "insatiable bandwidth hogs", the problem is the failure to provide sufficient international network bandwidth to handle the traffic you have promised subscribers to carry. Maintaining an 80% gross margin while complaining about "hogs" is just hypocritical.

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