Where does the money go?

This is just something I have been thinking... I'll post it here and see if it attracts any opinions.

In the UK we seem to be lagging behind some Western countries in internet connections beyond FTTC. FTTP/FTTB seems to have been the growth strategy for almost a decade now in Nordic countries and many others as well.

Then I thought about Hull. I just checked their progress from Thinkbroadband maps and I must say I am impressed how they have managed to go from nothing to past 75% in only a couple of years. Hyperoptic and Gigaclear seem to have a massive installation backlog, and they are growing fast. Virgin had to scale down a bit their ambitions in project lightning due to internal problems, but the project is still there. Today we have read about OR plans to install FTTP to three million premises, but their plan had several caveats attached.

In Nordic countries the business model resembles KC. There are local telcos that build infrastructure and act as ISPs. This is what Hyperoptic, Virgin and others do as well. It seems to me that this model seems to lead to more investment than the split model where OR manages infrastructure and ISPs do whatever they do.

OR blames lack of money; their share is the line rental only. But ISPs do not exactly seem to be gold mines either. So where does the money go?

How much of our monthly fees go to the "technical" part of operations, and how much is wasted on advertising and attracting new customers with gift cards etc. When I think about advertising I see I have a hunch it might be a lot. It is impossible to go anywhere in London without seeing ads from OR network based ISPs. Open your telly and there is more. Every web site even remotely related to technology carries ads from ISPs.

How much are we throwing away because of the business model where customers are expected to change their OR infrastructure based ISPs yearly? As there is no technical difference between them, an ISP that does not take part in the advertisement and gift card race will be out of business, so they all must be shovelling money to this just to keep up - without any significant, permanent growth in customer base. This month operator X hoovers customers from the others, next month it will be Y doing the same, getting back from X more or less the same amount they lost a month ago.

Or am I completely wrong and this is just a minor expense on ISP budgets?

Edited by deleted (Thu 01-Feb-18 11:16:52)

In reply to a post by hvis42:

n Nordic countries the business model resembles KC. There are local telcos that build infrastructure and act as ISPs.

Which as far as Ofcom is a NO No as their is no competition to ensure fair pricing.

In fact go back a few years and KC was a telco that people wanted to move away from and could not as they had a monopoly and no other isp etc was allowed in.

Personally I think that any infrastructure should be publicly/centrally controlled and the service side is available to anyone that wants to pay to access it.

I fully understand this, but it also seems to mean that a lot of money needs to be spent on attracting customers. Sure, there is competition, but it also means the business is haemorrhaging money to a completely unrelated business.

I do not know what could be done to avoid this in the "public ownership" model. I like it in principle, but it does seem to lead to perpetual waste, and money that could be used to upgrade infrastructure is being shovelled to advertisement agencies and free gifts to customers.

The idea is the public fund the infrastructure and any upgrades, so everyone gets the same and not a select few, due to the fact they live in a area that is going to bring in a lot of profit. The isp's then pay to access this service.

It is time that loyalty was rewarded and we stopped the whole we need to gain more customers at any cost.
But that is something that regulators & the likes of This story want. They seem to see that changing companies is good for us.....
It would be interesting to see some figures from companies quoting the number gained against the number lost and the cost of gaining these customers.

Just to give some background in the US they have many cable companies... Where I am looking at living when I move over, there is only 1 Cable Provider which yes has 300Mbps but for 25Mbps it is $60, they know they are the only provider so do not offer unlimited, but unlimited subject to 1Tb fair usage... For a router, you have to pay $11 a month gateway rental, for TV services they charge you both a HD technology fee of $9.95 and a rental fee of $10 for the HD tv box rental. That is approx $30 rental charges ontop of the package price, which including TV is over $100 anyway. After 1 year the price rises but you have no alternative.

When you look at a purely free market working, where providers can choose where to place themselves and gain a monopoly share like the US, prices are higher, there is no competition and plenty of areas are not covered. There are some areas which can only get AT&T Fiber, which often is sold as max 10Mbps due to line length.

In the absence of government intervention it seems not so good. In the UK I think we have cheap utilities and overall not a bad system, although not perfect.

+1
I totally agree with you there referring to the US, I have friends over there and they are always having issues with their ISP concerning the speed and what they pay.

Sadly their ISP is the only one that covers their area, so they have no choice and just have to pay what the ISP is asking.

And there is us lot moaning about our connections, but at least we have a choice of ISP to choose from.

Granted like you say its not perfect, but still good.

Paul

In reply to a post by hvis42:

Then I thought about Hull. I just checked their progress from Thinkbroadband maps and I must say I am impressed how they have managed to go from nothing to past 75% in only a couple of years.

KCOM were moving exceptionally slowly until 2 years ago.

What happened? Well,
a) KCOM spent 4 years to reach 50,000 premises
b) KCOM sold their national network to CityFibre for £90m
c) KCOM started to spend at a reasonable rate, and took 2 years to reach the next 100,000
d) KCOM's recent announcement to target 100% went with a total spend of about £85m

On balance, then, the money seems to have come from capital reserves, rather than from any increased income.

And that isn't a surprise: KCOM's entry-level 50/10 Lightstream package is the same price as their standard ADSL2+ package, both coming with 35GB download limits.

If KCOM are making any extra money from a line, it is only via those who upgrade packages to higher capacity. Which will come with its own backhaul costs.

I used to work with people who lived in and around Minneapolis. Several of them were serviced by a council built network. It was expensive and the top speed was poor - 20Mb/s if I remember. The council had refused to invest any more money in it and no other providers were interested in taking it over. So they were stuck.

The irony was that Minneapolis actually has extremely good internet provision (the reason the company was based there). They provided eForensics services worldwide from that base.

Edited by Andrue (Fri 02-Feb-18 09:09:46)

In reply to a post by JohnR:

The idea is the public fund the infrastructure and any upgrades, so everyone gets the same and not a select few, due to the fact they live in a area that is going to bring in a lot of profit. The isp's then pay to access this service.

So..a lot like the national road network, then?

Hmm.

Is that a road network where the roads are of different "sizes" - more rural tend to have smaller roads? And where key trunk roads are maintained more often than those in more rural areas?