Quote:
Originally Posted by Broadbandings
£2/month per Mbps on a 10GbE port with a 3 year contract in the states. Just a Google search for transit shows under £10/Mbps/month in the UK from resellers of transit.
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Now multiply that £10mps by 20 Meg. Assuming VM get some sort of bulk discount, we can be generous and assume it costs them £100pcm to give you your 20 meg. That's a 1:1 connection (which admittedly, VM don't offer). This is why they use many to 1 contention (they state the average is 20:1), so that cost can be divided up amongst many customers.
Their business model (along with that of most ISPs) is based on the assumption that most of the users will use hardly any of their available bandwidth. From what I have been told, VM take quite heavy losses on their top-tier product, and make up these losses using the lower tiers.
Add in things like iPlayer (or any web based VOD service, even Youtube), and all of a sudden, the people who rarely bothered using their connection to it's full potential start to do so more often. Too many of these people do this, and the business model falls apart.
Unfortunately, it is not really practical for ISPs to offer broadband for the low prices it is offered at now, unless they can subsidise the cost with another product, use STM or Cap the service.