Let me first start by saying I bear no official affiliations to Plusnet or other companies referenced below – I am merely a curious consumer digesting what becomes of my monthly Direct Debit.
Plusnet ‘rent’ the xDSL part of customers’ lines from Openreach (a BT company). The price Plusnet are charged for this rental depends on the type of broadband you have; ADSL or FTTC/VDSL2. Openreach charge £5.88 per month rental for ADSL2+ and £16.00 per month rental for the 80/20 FTTC product. Quite pricey, right? But that’s not all!
Once Plusnet have rented the xDSL lines, they still need to get the line connected from your local area down to Plusnet’s main network points in London. BT Wholesale – responsible for doing this bit – charge Plusnet a whopping £40 per month per Mb/s. That means, if your broadband speed was 10Mb/s and you were to download 24*7 in a month, that’d cost Plusnet an incredible £400, plus your £5.88 rental charge. Crazy!
Now then, down to actual figures. Thanks to Plusnet’s public graphing we can see they subscribe to at least 44Gb/s with BT Wholesale. That’s 45,056 Mb/s – which works out an eyewatering £1,802,240 EVERY MONTH! Also on that public graphing page we can see Plusnet have at least 556,380 customers connected to their network – probably more in total because some customers turn off their routers when they’re not online. (Just a quick note, if all 556,380 customers were using the internet at the same, each customer would only get 0.07Mb/s – but we’ll cover how this works in another blog).
Wait, there’s more! We’re still only on the network layer, and we’re adding even more costs to the bill. So we’ve covered the costs to get your data from your home down to Plusnet’s network in London, but now Plusnet need to get your data ‘on the Internet’ which they do by the process of peering with other networks and purchasing transit from carriers.
Plusnet have 4x 10Gb/s ports with LINX (the London Internet eXchange), and the monthly cost for these ports is £4630. Then, Plusnet have transit agreements and links with many carriers including Level(3). I’m unable to find out how much Level(3) are charging Plusnet or how much they buy – but I’d estimate 5Gb/s at around £1.50 per Mb/s per month which works out £7500 per month. Plusnet peer with many other networks too, I can’t find out how much they have nor pay for these so we’ll just estimate roughly an extra £20,000 per month. All these costs combined work out at a hefty £32,130 per month.
So let’s just weigh up the potential costs of providing broadband based on the above pricing.
I’m going to work out the approximate cost price of Plusnet’s £9.99 Unlimited Broadband packages based on the above information and assuming all of Plusnet’s customerbase are on this package.
Openreach ADSL2+ rental cost per customer = £5.88
BT Wholesale WBC bandwidth/transit/data costs = £1,802,240 / 556,380 customers = £3.24 per customer
Peering/Transit costs = £32,130 / 556,380 customers = £0.06 per customer (lol tiny in comparison!)
Total cost of £9.18 per customer per month. That’s quite a lot, remembering the cost of billing customers, customer and technical support representatives, the hosting of e-mail and ‘value added services’ like such, plus advertising the product. Unsurprisingly, it’s unlikely Plusnet will EVER make a profit on this base Broadband package! I’ll explain in another blog how ISP’s are still profitable in this day and age… keep your eyes open for future blogs!
It must be noted, many of the prices in this blog are estimated based on publicly available information. Actual costs may be higher, or indeed lower, than I have worked out… but hopefully this blog will give more of an insight to the costs of running a value-for-money mainsteam ISP.
Any unreferenced sources: