Broadband boss: 'The end of freeloading is nigh'
There's no such thing as a freetard's lunch
The telecomms industry is in a Mexican stand-off and we'll have to pay for the data we use. So reckons David Williams, the outspoken chief executive of broadband-by-satellite outfit the Avanti Group.
Williams had an interesting letter in the FT yesterday castigating "content free loaders". So I gave him a call.
Williams' concern isn't actually pirates, but the bigger question of who pays for their free lunches.
"All-you-can-eat will disappear, I am 100 per cent sure of that," he predicts, with operators quietly creating tiered pricing structures they have yet to unveil.
So here's a summary of what he said:
"Neither consumers or providers are bearing the cost. Telecomms companies have set up tariffs to download what is effectively an unlimited amount of data. Those all-you-can-eat tariffs were set up on the basis of how much consumers would use; few expected to reach those so soon," he says.
"So it's a Mexican Stand Off. If a market has four operators, and one introduces charging by data, then the others might have a short-term opportunity to criticise them, but they will follow in the end."
Here's how he explains the maths.
A typical family watches 28 hours of TV, mostly by FreeView or Sky. The video is encoded at 1.5Mbit/s. iPlayer is encoded at about the same rate. If that was transmitted over IP, and the unicast protocols we use today, that would be around 81GB of data a month. Using the current BT pricing (where £15.99 buys you 10GB) then that would cost the family around £87 per month, after they'd paid their excess charges, and before they'd done any web surfing, shopping or downloading music.
If they were watching in HD - as around two million households are, mostly on Sky - then the figure would be 145GB or £600 per month at current rates.
It's not going to happen - at least not at these prices.
Williams says the cost incurred is moving data from the local loop to the backbone; the backbone itself is inexpensive.
"I'm long on any telcomms company that owns transmission infrastructure - that includes mobile operators - they'll generate significant returns."
Virgin could be a winner here, he predicts because it has "fantastic economics for the transfer of video over short distances. They already have the street cabinet infrastructure."
The only way it will change, he reckons, is if somebody throws £50bn at the broadband infrastructure - which nobody's got - and people put up with their roads being dug up for five years.
"There's nothing magic about telecomms that will change that. If we want higher capacity data networks, a lot of capital has to be raised. For that to happen, there has to be a business plan that shows there will be capital returns on the investment. Which means the consumer has to pay for it. But if they're confronted with bill rises of 500 per cent, then why would a family bother?"
Your thoughts are welcome. ®
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