Its The Network, Stupid!

PTCL has recently updated its tariffs for Internet bandwidth that most of the Internet Service Providers in Pakistan subscribe to. The new rates reflect a 37% reduction. A transit Internet capacity of and E1  now costs $1,000 per month ($500/mb). The new rate table is:

S. No.

Speed

Charges (US$)
Per Month
At Karachi

Charges US$)
Per Month
other than Karachi

1

2 Mbps

1,000

1,200

2

45 Mbps

15,000

18,000

3

155 Mbps

30,000

36,000

Due to obvious reasons, this blog had been following bandwidth’s price reduction in Pakistan. We have seen the price of 1 E1 coming down from  $6,000 per E1 to the current $1,000 in around four years.

Transit bandwidth costs getting lower means better business costs for ICT enterprises. However, for ISPs whose business in Pakistan was thriving on the ‘scarcity and preciousness of bandwidth’ will get effected fundamentally. Until now, ‘building’ out the access network had not be a top concern of most of the Internet service providers in Pakistan. Selling any precious commodity – be it bandwidth or saffron, typically becomes a business where needy customers will come to you and you can make your margins on the the transaction.

With bandwidth prices getting more aligned with rates of the same elsewhere,the question of ‘owning your users’ (or, in other words, building your network) would gain importances. Typical ISPs today have a number of wireless or optical fiber links from their prime customers coming from various location (in each big city) to (typically just one) their facility which has bulk bandwidth  provisioned. The higher costs of bandwidth in Pakistan had traditionally allowed ISPs to hide the high costs of such isolated last miles within the total price of the deal and get away with this inefficiency of (not building an access network of) their own.

Lower bandwidth rates, widely advertised and discussed, will now prompt the customers to question the selling cost of the bandwidth. This will quickly point to the fact that in a poorly provisioned general telecom environment (bad copper, lack of fiber etc.) the absence of ISPs own access network is contributing to the total cost of the link.

ISPs will now be forced more than ever to build their networks in major cities to make sure that transit bandwidth still remains the only major element in their offered prices to their customers. Current practice of high price wireless and fiber links (all being pulled to a central location) must go away.

It is also important to note that PTCL has now, for the first time, started making the price differentials between Karachi and upcountry obvious.  The cost of carrying the bandwidth from Karachi (where it typically enters Pakistan via the submarine cables) to up country has always been there but has always been absorbed in the model and the industry has been presented with a uniform rate across Pakistan. The new private ownership of PTCL cannot afford such political luxuries and is making the costs obvious in its tariffs.

This should also send a ‘think-again wave’ to TWA and other operators who were planning to offer transit Internet bandwidth on uniform rates  across Pakistan. TWA was reportedly banking on the transit capacities across Pakistan that it is taking from Mobilink’s under-construction long haul optical fiber network. Unless the capacity comes free of costs, the price has to be paid either by the customers or subsidized by TWA which appears to be unlikely.

Summarizing, booming bandwidth consumption and lower bulk bandwidth costs are pushing up the pipe sizes for Internet across Pakistan which makes networks costs considerable. Considerable network costs mean that they do not get subsidized anymore and for end ISPs, owning their network will start making more and more business sense. Is the lot ready?

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One Response to “Its The Network, Stupid!”

  1. Haris Shamsi Says:

    ….. Further i think that industry would see few NAPs in Karachi pretty soon. Competition in Domestic connectivity would go high and result in reduced prices for for network management point of you and keeping lower operational cost i think best idea would be to get bandwidth in karachi and distribute from here …


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