Tuesday, March 21, 2006

Peter Nowak: Xtra plans don't live up to their billing

"Coming soon: faster, cheaper broadband," pronounce the Telecom ads. Yeah right.

The company is rolling out its new Xtra plans on April 2, which is a good idea because launching them a day earlier would really highlight how much of a joke they are.

The problem is, the services won't be either faster or cheaper. The ads, if they were accurate, should read: "Coming soon ... broadband." And given the superior services offered elsewhere in the world, which make New Zealand's broadband look pathetic, even that would be generous.

The Commerce Commission is looking into complaints of misleading advertising, and Telecom admitted last week to the Dominion Post that its services were not necessarily cheaper for residential customers.

There is little doubt the prices are better for businesses - top-end plans will cost $150, compared with up to thousands of dollars previously. But for residential customers, the pricing propositions can work out for the worse.

Xtra's current entry-level plan - 256 kilobits per second download, 128 kilobits upload, and 1 gigabyte data usage - is priced at $39.95 a month. The new plan will have the same speeds but a much lower data limit of 200 megabytes and will cost $29.95. Going over that limit will cost 2c per megabyte, which means an extra $16 to equal the previous 1 gigabyte. That's a grand total of $45.95 - hardly cheaper.

The next new plan will have a download speed of 2 megabits, upload of 128 kilobits, and 1 gigabyte of data, for $39.95. The existing plan has the same speeds with 10 gigabytes of data for $59.95. The new plan will technically be cheaper as there are no excess charges once the user exceeds their data cap.

But wait, not so fast - literally. That 1 gigabyte limit is one tenth of the existing plan and once it is reached, the download speed will be throttled down to 54 kilobits per second. This doesn't look like such a deal - $40 for dial-up access? No thank you.

The new top speeds won't provide much value either. The basic 3.5 megabit download service, with 128 kilobit upload and 5 gigabytes, will cost $49.95. Users who go over the limit also get shunted down to dial-up speed.

Stepping up to 3.5 megabit download and 512 upload with a 10 gigabyte limit will cost $79.95. This particular service is really what should be considered entry-level, and it's shocking that Telecom is making consumers pay so much simply for the privilege of a faster upload. The fact that better upload speeds improve real-time internet phone services such as Skype - a big threat to Telecom's traditional calling revenue - wouldn't have anything to do with it, would it?

Then there's the issue of speed itself. It's commonly understood and accepted that advertised broadband speeds are best-case scenarios, and not necessarily what users get all the time. A 2-megabit download connection, therefore, is likely to be slower if the user lives far from a telephone exchange, or if many others are online at the same time.

In this respect, customers essentially have to trust Telecom to maximise those high-speed times and minimises slowdowns.

The main way Telecom does this is through setting something called the contention ratio, which is how many people share one connection. According to several internet service providers who resell Telecom's broadband, their existing contracts guarantee this ratio at 50:1, which means 50 users share one line.

This is bad to start with. If there are 50 users on one 2-megabit line at the same time, they're getting 40 kilobits of download speed each. That's slower than dial-up.

Telecom has refused to specify what the ratio will be under the new plans, but says it will be a "best-efforts" service. The ISPs say Telecom has indicated the ratio will be worse, and a customer could end up sharing a line with 124 others. If that's so, a quick calculation shows that 3.5-megabit download speeds could slow to as bad as 28 kilobits per second - half the speed of dial-up - at busy times.

Is this scaremongering on the part of the ISPs, who simply want a better deal out of Telecom? Hardly. If Telecom won't specify or guarantee its contention ratio - and it has declined several requests to do so - its claim of faster services has no credibility.

Telecom has been trying to foist similar "cheaper and faster" services on its resellers. It's no surprise the two biggest - ihug and CallPlus - have told the company to shove it and are seeking better terms from the Commerce Commission. Smaller ISPs, unfortunately, have to either resell Telecom's swill or face extinction.

Telecom will soon try to stave off or water down looming regulation with the promise of ADSL2+ services - rumours of up to 24-megabit speeds are swirling - in a move that will amount to yet another promise of "cheaper and faster" broadband.

But there is increasing evidence - including the plans being rolled out in two weeks - that Telecom's broadband promises can't be believed.

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