When looking for a broadband connection, you may notice that costs fall into two categories: highly inexpensive plans with a lot of data and costly plans with many features (some of which you may not need). But why is there such a significant pricing disparity between the higher and lower end of the market?
What sets them apart from each other in terms of value?
We all want to obtain the best deal possible, but if you notice a huge disparity when you compare internet plans, you often get that painful’ too good to be true feeling.
Let’s compare internet plans from these brands first.
• TPG – NBN50, $69.99. Unlimited internet, 50Mbps standard + average night-time speed, phone line and WiFi modem included.
• Dodo – NBN50, $75. Unlimited data, 50Mbps standard plus average night-time speed, first month free.
• Telstra – NBN, $90. Average speed – unlimited data, standard 50Mbps plus usual night-time speed.
What does Telstra broadband possibly have to offer to justify such a price difference?
Differentiators
Each telco business has a very similar list of expenditures that they must cover. This may be split into two parts:
• The cost of wholesale access to the equipment that delivers your connection (wires and networks)
• Customer relations, technical assistance, and credit control are all covered by payroll
• Engineers’ pay and back-office expenses
• Advertisement
The following are some methods that an ISP might reduce their exposure to these costs:
• Rather than leasing equipment from another company, they own it
• Customer relations and technical assistance are being outsourced to low- and middle-income countries
• They allow only automated direct debit and billing in advance rather than in arrears, eliminating the need to chase down consumers for overdue invoices
• Contracting out engineering services
• Keeping the amount of advertising to a bare minimum
We have selected three retailers that are “majority wholesalers” providing services directly to consumers.
Telstra, Dodo, and TPG have fibre-optic networks, exchange equipment, and even underwater lines.
That means they own and manage the infrastructure transporting your connection to the rest of the globe for 99 per cent of the connection (a hundred per cent in Telstra’s case). You don’t have to purchase circuits on another company’s network.
The copper line from the exchange to your property, which belongs to Telstra, is the only thing Dodo and TPG have to purchase. All three businesses will outsource parts of their customer service and technical support staff, either entirely or partially.
TPG has the most direct and cheapest advertising, with print, radio, and television commercials with no actors and only a price and a list of available. Telstra, on the other hand, has massive sponsorship deals and extensive national advertising across all media.
Telstra has a transmission profile with massive mobile networks, satellite connections, and other hard equipment that surpasses TPG. This helps explain their higher cost, but they can handle so much of the distribution process that they should help to level the playing field.
Telstra, in particular, has a stronger brand than older, larger businesses and a strong retail presence. TPG does not have any retail locations of its own.
To reduce its vulnerability to overdue bills, TPG utilises direct debit and upfront payments, so connection costs must be paid on the spot, and debts are deducted immediately from a savings account or credit card. To some extent, this permits them to run debt-free. However, this means that individuals who are unhappy with this arrangement will be unable to use their services; for example, individuals who prefer to pay their bills in cash at a post office will be unable to do so.
Conclusion
When we compare internet plans, Telstra is substantially more expensive than other providers. However, it’s important to remember that Telstra is the backbone of everyone’s internet connection. TPG and Dodo find specific distribution regions with large inhabitants, whilst Telstra covers the whole nation.
Telstra is the only business capable of doing so since it controls the “last mile” network that connects every house in Australia. Telstra has a lot of overhead and obligations. Thus, their increased pricing may be interpreted as a means to balance out the expensive consumers with those who are cheaper to service.
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