More Data to Come

Expect data caps on consumer and business internet plans to increase again. But why?

Anyone with a home internet connection better than dial-up has probably noticed that data caps on most internet plans have increased dramatically in recent years. It used to be a 5Gb or 10Gb plan was standard for ADSL services. Then it jumped to around 30-50Gb per month. Now fairly standard plans sit at well over 100Gb. My current plan is 200Gb, and costs basically the same as my 10Gb plan did back in the day.

In all that time the actual speed of my service hasn’t changed. It’s still ADSL2+, and the inherent limits of that technology haven’t been lessened substantially (Annex M technology has improved my upload speeds).

The reasons for this enormous jump in available data – or, to look at it another way, this immense reduction in the cost of data – relate predictably to both demand and supply. In terms of demand, we’re constantly told how much more data everyone is using. People aren’t just getting 100Gb plans, they’re using them. Global data consumption has increased four-fold in the last three years. Journalists with a poor grasp of mathematics have termed this growth ‘exponential’, although it thankfully isn’t. But it is a lot, and most of us are driving it, whether we think of ourselves as power-users or not.

You know how Youtube videos were limited to ten minutes until a few years ago? Now their content can be almost any length. It’s understandable that the average user thinks nothing of this, but the infrastructure investment required to enable this change was colossal. Now that it has happened,  the increased data traffic from people uploading longer content (and now in resolutions up to 1080p), and (far more so) people downloading, is staggering. And this is just one (very popular) website changing their policy.

Across the board, everything requires more data. There was a time when 10Gb for sufficient, even including online gaming. I now get through more that simply by browsing. Websites are now far more detailed, embedded video and audio is everywhere, and Cloud computing generates a constant flow of traffic.

Consequently we can say that in order to facilitate this increased requirement, competition among ISPs has driven down the cost of data. But this isn’t the whole story. Here in Australia, there has also been a huge increase in supply.

The main determinant in the price of data is not driven by competition at the consumer end. It is driven by the cost of data coming in to the country. Australia generates relatively little content, and the vast majority of the data we consume comes from offshore (about 99%), from Asia, North America and Europe.

This enters Australia via a series of submarine cables operated by private companies and consortiums. There are four main cables. In no particular order, these are The Southern Cross Cable (which links Australia and New Zealand directly with the continental US; the Pipe Pacific Cable (which connects Australia to Guam); Telstra Endeavour (Australia to Hawaii); the Australia-Japan Cable (take a guess), as well as a few older, lower-capacity cables.

The large increases in data caps usually correspond to opening of a new cable, or to an increase in the capacity or bandwidth of an existing one. For example, it is estimated that the opening of the Pipe Pacific Cable in 2009 drove down the price of Australian data by ‘up to 50%’.

 Of course, the flow-on through the market isn’t seamless. Just last year Senator Conroy complained that there was too little competition in this sector, and that Australians are still paying too much for overseas data. He threatened to build a government-owned cable at a cost of $250million, although presumably he wouldn’t do it all himself. (He’d need to borrow a boat, for starters.)

Southern Cross has just announced that it is slashing the price of data by 20%, following on from recent upgrades driving towards a short-term goal of 2Tbps. Southern Cross claims that capacity on current cables could reach 7Tbps within the decade. Expect this cost reduction to flow in some form (presumably diluted) fairly soon.

Anyway: that is why data caps will increase. Of course, ISPs could always keep the data caps as they are, and pass the cheaper data costs on to consumers in the form of cheaper plans.

They could, but they won’t. In their defence, they have their reasons.