ISPs “exaggerate the cost of data”

ISPs are over-egging the costs of meeting the ever-increasing demand for data, according to a new report.


Both fixed and mobile providers have claimed that increased internet traffic has resulted in “ballooning” costs for networks. Some ISPs have argued that content providers should pay them to help meet the cost of supplying bandwidth-intensive services such as the BBC iPlayer.

However, a new report commissioned by content providers – including the BBC, Channel 4 and Skype – claims the costs of delivering additional internet traffic have been wildly exaggerated by the ISPs.

For fixed networks, traffic-related costs are low, falling on a unit basis and likely to fall overall

“Traffic-related costs are a small percentage of the total connectivity revenue, and despite traffic growth, this percentage is expected to stay constant or decline,” claims the report, written by telecoms experts Plum Consulting.

The report claims the cost of delivering additional gigabytes of data are mere pennies. “Studies in Canada and in the UK… put the incremental cost of fixed network traffic at around €0.01-0.03 per GB.”

The report concedes that the cost of adding capacity on mobile networks “are significantly higher than they are for fixed networks” because “the radio-access network is shared by users”.

However, it claims forthcoming 4G technologies will significantly reduce those costs. “Forward-looking estimates which take account of the transition to LTE [Long Term Evolution], additional spectrum and traffic subscriber growth… puts the cost to the mobile network operators at under €1 per GB,” Plum Consulting claims.

As the report states, that cost is “well below existing smartphone data tariffs of around €10 per GB”.

Describing claims of ballooning costs as a “myth”, the report concludes that “for fixed networks, traffic-related costs are low, falling on a unit basis and likely to fall overall given declines in traffic growth and on-going cost-reducing technical progress”.

Mobile network data costs are also “declining on a unit cost basis”.

“Rubbish” figures

ISP representatives claim the figures quoted in the report are inaccurate. “The reality is bandwidth is shooting up,” said Trefor Davies, CTO of communications provider Timico and a member of the board at the Internet Service Providers’ Association (ISPA). “Bandwidth is by far the greatest proportion of cost for an ISP.”

Davies said this is especially the case for smaller ISPs who rent lines on a wholesale basis from BT. “It’s very much you pay for what you use,” he said. “If you use twice as much bandwidth, you’re going to be paying twice as much.”

Even for ISPs running their own network, such as BT, Davies claims the figures of €0.01-0.03 per GB are “rubbish”. “It’s an order of magnitude greater than that,” he claimed.

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