Why aren't there more unlimited broadband plans in Australia?

Unlimited broadband plans are still a rarity in Australia, with very few Internet Service Providers (ISPs) offering plans with no limits on data useage.

It's often a puzzle for foreigners arriving in Australia, who are unaccustomed to paying by the Gigabyte for their plan. However, there are reasons for the difference and ISPs in the US and the UK may need to switch to the Australian model soon.

Broadband in Australia

Australia has always been a little different. The Organisation for Economic Cooperation and Development (OECD) reported in 2007 that Australia was one of only four countries with capped broadband plans.

The difference is down to the cost of the bandwidth ISPs have to buy, according to Andrew Sims, general manager, marketing and products for iPrimus.

"In my opinion, the cost of overseas traffic and bandwidth in Australia is still significantly high in comparison to the UK and the US, making it far cheaper to deliver these types of plans to customers in those countries," says Mr Sims.

As most of the content we access is from overseas, it makes sense that Australian ISPs and therefore Australian customers, have to pay more compared to our US counterparts.

Australian ISPs also face infrastructure and regulatory obstacles, which also push their costs up.

Australian ISPs usually charge customers by the amount of data they use, while ISPs in other countries decided to offer unlimited data but keep the data use down by shaping plans.

According to iPrimus, there just isn't a demand for this type of plan over here.

"In Australia, we see a very small market for these unlimited style plans, as the average usage is still somewhat low compared to the allowances offered in plans," Mr Sims said.

Internode product manager Jim Kellett believes recently introduced Terabyte plans have made unlimited plans redundant anyway.

"A Terabyte is a staggering amount of information," Mr Kellett says.

On a Terabyte plan, every month customers can download:

  • 200 DVD-quality movie downloads from iTunes
  • around 16,000 hours of MP3 music (a quarter of a million songs!)
  • browse about half a million websites
  • send about half a billion tweets
  • upload roughly two million photos to sites like Flickr and Facebook.

According to Internode, there is not a big demand for the Terabyte plans, as most people in Australia simply do not need this much data.

Broadband in the US

In the US, the norm is to offer an unlimited plan and charge premium prices for the higher speeds. This has worked quite well as the overwhelming majority of consumers are light to moderate users and ISPs can price their plans according to what most people actually use.

But demand for data is on the increase and this is starting to hurt the bottom line for broadband providers in the US. Consumers in the US, and most other countries, are not used to paying for data so ISPs now have a problem. Either prices are raised beyond most consumers capacity to pay, broadband plans are capped, or internet-based organisations like Facebook and YouTube start paying for access.

None of these options seem too appealing, but the idea of charging websites for access to internet users has outraged many. Technically, ISPs could charge websites by threatening to restrict access from customers. This could put an end to the 'open internet' with established organisations able to pay the fee and new websites forced to reconsider.

The issue is usually referred to as 'net neutrality' and the US government is considering legislation to prevent ISPs from restricting access to websites on these grounds.

On the other hand, someone has to pay. If it's not the companies like YouTube, it's going to be the consumers who are watching the videos.

If the ISPs are prevented from charging websites, the only real alternative is a capped service. Although US consumers have expressed outrage at such a proposal, major ISPs in the US are moving toward Australian-style plans, including AT&T.

National Broadband Network

Capping internet use by charging excess fees or throttling is certainly one way to solve the problem of limited bandwidth. However, once the National Broadband Network (NBN) is rolled out and consumers can download high definition quality movies in minutes, video conference in high definition or stream all their TV shows over the internet, demand for data is predicted to soar.

Minister for Broadband, Senator Conroy, has predicted that the NBN will drive competition, which will end capped plans. However, ISPs have disagreed, arguing that the cost of delivering data remains high and is the main obstacle to providing unlimited plans.

If the NBN can eliminate many of the regulatory and infrastructure hurdles, costs for ISPs should start to come down and more competition should drive prices even lower. Although these factors may not lead to more unlimited plans, Australian consumers in the near future should be able to access large plans at a reasonable price, at incredibly fast speeds.