What is so costly to Telstra about 38GB?

There is a story today — which used to be more common — about someone how exceeded their 60GB monthly broadband usage allowance by 38GB and was charged 15 cents per MB or $6000 more than expected. I usually get notifications as I reach my monthly limit — which doesn’t happen too often.But even so, does it really cost Telstra anywhere near 15 cents per MB for ‘over-use’?

Well of course not or they couldn’t get away with charging people just $130 for the first 60GB — translating into .21 cents per MB — that is, over 70 times less. What they might be doing is price discriminating and charging people who use more, even more per MB than low bandwidth users. But looking at the next category down, 25GB for $90 per month (or 3.6 cents per MB) suggests that they are volume discounting. Although it is hard to tell because that 25GB plan has shaping without the $6000 bill risk that the higher one has.

So what they are price discriminating on is on the basis of inability to manage your broadband usage. They are saying that “we would like individual customers to put a huge amount of effort into keeping their usage down” in preference to “if you are having a heavy usage month we will sell you a new plan for another 60GB for $130.” This strikes me as insane because it is driving people onto smaller plans when Telstra could be just selling blocks of usage without worrying about your rate of usage. I cannot imagine there is a single customer-specific cost in too much usage even if there are network costs in it.

That said, when it gets bad enough that you can get a reporter interested, Telstra appears to save the penalty fee. As far as I am concerned this only makes my point stronger.

10 thoughts on “What is so costly to Telstra about 38GB?”

  1. Might I suggest that Telstra is playing the same game that banks and phone companies do – inflicting heavy “stupidity taxes” on their less-informed customers so that they can advertise lower headline prices.


  2. I don’t doubt the stupidity tax but surely Telstra don’t want to drive away their core base! Most smart people (obviously making no judgment about myself) don’t go through Telstra.


  3. The rational thing to do, which iiNet and no doubt others do too, is to fire off an email when you are at about 90% of monthly usage then, if you exceed it, “shape” the data rate down to dial-up speed for the rest of the month. If you find you are going heavily over, there is no Telstra-type fine, but you can upgrade to a higher download plan.

    3 Mobile (Hutchison) has an interesting prepaid wireless plan where you buy 12 GB upfron for $149, you have up to 12 months to use it all and when you have you can buy another 12 GB. http://store.three.com.au/prepaidbroadband/Internet-Key-plus-Data

    It’s expensive per GB compared with fixed line cost but really great for someone who works mostly at home or in the office with a fixed line ISP but also carts a notebook with them around the place from time to time or on holiday (subject to remaining in a wireless coverage area).

    Instead of innovative services which benefit customers and vendors alike, Telstra seems to have the same mentality as the music industry: make life as inconvenient for your customers as you can and never miss an opportunity to punish them.

    Still, as Sol keeps telling us, he runs Telstra for the shareholders, not for the customers.


  4. I can think of 2 other reasons.

    60G is an awful lot. It’s pretty hard for an individual to use it all up online gaming won’t get near that they aren’t heavy on bandwidth, but have high latency demands.

    downloading DVD’s (over 10 a month) will get you to 60G.

    so it could be used to prevent/discourage piracy.

    now.. s medium businesses might easily get past 60G. They are typically on T1 connections to their businesses, not ADSL/Cable.

    the more rational reason is that they have other “business” type solutions (like a T1) which they would be cannibalizing if they offered a cheap bandwidth at higher than 60G limits.


  5. I have a question about the economics underlying this discussion.

    The physical network is in place and the cost of maintaining it does not depend on the amount of data transmitted through it. Therefore the incremental cost to Telstra and its competitors of transmitting a GB of data their networks is close to zero.

    In spite of this the price that customers pay per GB is nowhere near zero.

    That’s nice for Telstra and its competitors. How do they do this? Are they providing a value-add somewhere else? Are they recouping past infrastructure development costs?


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