Australia And New Zealand’s Bandwidth Costs Are Ridiculously High

The cost of buying bandwidth from network providers in Australia and New Zealand are extremely high. How high? Web performance company CloudFlare measured it and found that it is up to 21.3 times higher compared to Europe. The company blamed large telcos like Telstra and Optus for charging too much. Here’s what you need to know.

CloudFlare is used on over four million websites, routing traffic through its global network that spans 86 datacentres across 45 countries. It buys bandwidth, known as transit, from a number of different providers. Through the company’s open peering policy, it participates in nearly 150 internet exchanges. This gives the company an ability to gather insights on cost of bandwidth around the world, which is exactly what it did.

To do this, CloudFlare set a benchmark by designating the cost of transit in Europe and North America as 10 units, which avoids disclosing exact pricing, to compare regions by transit cost, percentage of peering and effective blending cost that combines the two.

In a lot of the regions that were assessed by CloudFlare, transit costs are high but that is often offset through peering. The percentage of peering that the company could do varies between locations.

Here’s a breakdown of CloudFlare’s bandwidth cost assessment:

Relative Cost of Bandwidth

Assuming cost of transit in Europe and North America is 10 units
Six expensive networks (HiNet, Korea Telecom, Optus, Telecom Argentina, Telefonica, Telstra)

Country Peering (%) Effective Bandwidth Cost (units) Ratio (relative to Europe) Effective Bandwidth Cost without expensive networks (units) Ratio (relative to Europe)
Middle East 100% 0 0.0x 0 0.0%
Europe 60% 4 1.0x 4 1.0x
North America 40% 6 1.5x 6 1.5x
Africa 90% 14 3.5x 14 3.5x
Asia 60% 28 7.0x 14 3.5x
South America 60% 28 17.0x 17 4.3x
Oceania (Australia/NZ) 50% 85 21.3x 17 4.3x

As you can see, Australia and New Zealand’s bandwidth cost is 21.3 times higher compared to Europe when you factor the peering percentage (Oceania was at 50 per cent).

CloudFlare noted that transit prices in Australia and New Zealand are lower than what they used to be but continue to be extremely high in relative terms. This has been largely attributed to the high transit prices charged by big telcos, namely Telstra and Optus. According to CloudFlare’s blog post: “If you exclude Optus and Telstra, then the price falls to 17 units — because we peer with nearly everyone else.”

CloudFlare actually had quite a bit to say about the exorbitant prices big telcos around the world charge for bandwidth and vented its frustrations about the difficulties it faced when try to negotiate for better prices:

“To give you a sense, these six networks represent less than 6% of the traffic but nearly 50% of our bandwidth costs.
“While we’ve tried to engage all these providers to reduce their extremely high costs and ensure that even our Free customers can be served across their networks, we’ve hit an impasse. To that end, unfortunately, we’ve made the decision that the only thing that will change these providers’ pricing is to make it clear how out of step they are with the rest of the world.”

CloudFare has now moved customers that are on its free plans off the six named transit providers, which would end up costing several of those providers more money as they will now have to backhaul traffic to other CloudFlare datacentres:

“For instance, if Telstra were to peer with CloudFlare then they would only have to move traffic over about 30 metres of fibre optic cable between our adjoining cages in the same datacentre. Now Telstra will need to backhaul traffic to Free customers to Los Angeles or Singapore over expensive undersea cables.”

CloudFlare is continuing negotiations with the six network providers to lower transit costs, although it just can’t contain its displeasure at the current situation: “Their behaviour is irrational in any competitive market and so it is not a surprise that each of these providers is a relative monopolist in their home market.”

What are your thoughts on the high bandwidth costs Down Under? Let us know in the comments.

[Via CloudFlare blog]

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