The Real cost of no competition

[Ean Austral]

Gday All,This doesn,t only apply to some L/rover stealerships..Was Looking at sending 2 pallets of seafood from Gove to Darwin.Gove is serviced by 1 barge company so thought they might sting me a bit..Boy was I wrong..I can send them from sea using the barge that services our fishery to Cairns, Road frieght them to Brisbane, then road frieght them to Darwin for 18 cents per kilo Cheaper,than Gove -Darwin direct...Makes some L/Rover options look good..Gotta feel for the people who live in Gove,I know there are a few members here from Gove.
Cheers Ean

[Crackerjack]

I am looking at moving back to Australia in the next couple of years and I am a member of a forum for potential and new migrants to see what people say about Australia and moving etc, one of the big topics is the cost of living and when you trawl the (poor quality) Australian websites you have to realize how uncompetitive prices are for goods and services, but especially services in Australia are.
A quick example........broadband, you all have it, how much do you pay?
I pay $10 a month for a 10mb connection speed with no download limit (reasonable use etc) and $30 a month for mobile with 100 Min's to any phone and 300 texts to any network, we have no roaming charges in the UK (roaming has got to be the biggest ripoff)
How many Australian websites have prices on them?
But we get ripped off plenty in the UK, mainly by the government!

[Pedro_The_Swift]

(NOT defending telstra:angel:)

BUT!

England is the size of a postage stamp compared to OZ,,,

with what, TEN times? the customers,,,

I would expect a bit more competition in all businesses in those circumstances.

[JDNSW]

Australia has an area about the same as the United States, with a population about the same as London. It is also remote from the rest of the civilised (or uncivilised) world, which is, of course, one of the attractions.

But this means that not only is delivery of services expensive simply because of the distances everything has to travel, but the small population means relatively little competition. This is exacerbated by the little recognised fact that Australia has a few large cities, say 500,000+, and very few cities between that size 10,000, particularly if you look on conurbations such as Newcastle/Sydney/Wollongong or Melbourne/Geelong as single cities. In fact, the majority of the towns shown on maps of Australia would have populations under 1,000, probably mostly under 100. Looking at my own situation, the local village is under 50, the next nearest centre is 20km away, about 100, then 40km to one with 800, and 50km to one with 45,000 - but that is one of the largest inland towns in Australia.

Because most services are regulated so that at least an attempt is made to provide equal service over the whole of the country, the distance costs are at least partly spread over the whole population.

For internet services, a large part of the reason for the high costs is that there are very few connections to the rest of the world - and these connections are long and expensive to lay, so competition is not strong. This is where most of the cost constraint is, as a large proportion of all internet traffic is to and from overseas.

John

[p38arover]

Australia has an area about the same as the United States,

Well, the contiguous states of the USA. :)



For internet services, a large part of the reason for the high costs is that there are very few connections to the rest of the world - and these connections are long and expensive to lay, so competition is not strong. This is where most of the cost constraint is, as a large proportion of all internet traffic is to and from overseas.

That I know a bit about - my previous job was with the company that provided most of them and my job was involved with the agreements to repair/maintian them. If you look at a map of the world showing submarine cables, you'd be amazed how many there are around Europe and how few there are into Australia.

See ICPC International Cable Protection Committee (http://www.iscpc.org/) and select Cable Data.

[dullbird]

I am looking at moving back to Australia in the next couple of years and I am a member of a forum for potential and new migrants to see what people say about Australia and moving etc, one of the big topics is the cost of living and when you trawl the (poor quality) Australian websites you have to realize how uncompetitive prices are for goods and services, but especially services in Australia are.
A quick example........broadband, you all have it, how much do you pay?
I pay $10 a month for a 10mb connection speed with no download limit (reasonable use etc) and $30 a month for mobile with 100 Min's to any phone and 300 texts to any network, we have no roaming charges in the UK (roaming has got to be the biggest ripoff)

How many Australian websites have prices on them?But we get ripped off plenty in the UK, mainly by the government!

hardly any that's what really **** us when we came to oz...

in saying that though prices are much much more negotiable here so perhaps that's why they don't do it as much....in fact you cant negotiate in the uk..unless you got balls of steel:lol2:

[Crackerjack]

....in fact you cant negotiate in the uk..unless you got balls of steel:lol2:

You would be surprised, if the recession has done ONE positive thing here it has made people a bit more willing to negotiate on price.

[Pedro_The_Swift]

You would be surprised, if the recession has done ONE positive thing here it has made people a bit more willing to negotiate on price.

why would this guy negotiate?
https://www.aulro.com/afvb/images/imported/2009/09/876.jpg

He, and hundreds like him, are probably the only person on the planet that delivers to that town,,,

and usually the town is thankfull for it!!

[V8Ian]

I used to work for a transport company who delivered groceries and general to remote locations. All prices at these locations were a rip-off. I was charged $30 for an item available at $14 in provincial areas, claiming the cost of transport causes the higher price. I checked the transport cost for the item in question, $0.09! No wonder the Grey Nomads try to avoid shopping in these places.

[clean32]

Australia has an area about the same as the United States, with a population about the same as London. It is also remote from the rest of the civilised (or uncivilised) world, which is, of course, one of the attractions.

But this means that not only is delivery of services expensive simply because of the distances everything has to travel, but the small population means relatively little competition. This is exacerbated by the little recognised fact that Australia has a few large cities, say 500,000+, and very few cities between that size 10,000, particularly if you look on conurbations such as Newcastle/Sydney/Wollongong or Melbourne/Geelong as single cities. In fact, the majority of the towns shown on maps of Australia would have populations under 1,000, probably mostly under 100. Looking at my own situation, the local village is under 50, the next nearest centre is 20km away, about 100, then 40km to one with 800, and 50km to one with 45,000 - but that is one of the largest inland towns in Australia.

Because most services are regulated so that at least an attempt is made to provide equal service over the whole of the country, the distance costs are at least partly spread over the whole population.

For internet services, a large part of the reason for the high costs is that there are very few connections to the rest of the world - and these connections are long and expensive to lay, so competition is not strong. This is where most of the cost constraint is, as a large proportion of all internet traffic is to and from overseas.

John

um so why is cellphones internet etc about 1\3 the cost of Australia in NZ.

what the federal government is doing is what the NZ government did a decade ago

[JDNSW]

um so why is cellphones internet etc about 1\3 the cost of Australia in NZ.
....

Mainly higher population density - in Australia, Telstra was the only player with widespread coverage, and the cost of duplicating that is very high, allowing them to charge what they want.

John

[clean32]

Mainly higher population density - in Australia, Telstra was the only player with widespread coverage, and the cost of duplicating that is very high, allowing them to charge what they want.

John

Granted that NZ has a higher average population destiny than australia i think about 3 times NZ 12 per klm australia 4 per klm average. but there are other factors to take into account. 80 percent of Australians population lives with in a destiny of 60 per klm2 where in NZ the highest may be 60 per klm2 but this is only for 10% of the population with the higher destiny average of about 1.5 million kiwis living in 45 per klm2 the next being 1.5 living at about 11 per klm2 and the balance at something silly like .8 per klm2 as well as new zealand has to contend with more weather extremes, earth quakes, fault lines mountain ranges etc of which very little is present in australia.

my point is that as 80% of Australia's population lives in a comparatively high destiny areas and the majority of the rest not being serviced at all. i cant see how the argument of austalias size stacks up cost wise. i do suspect that the lack of competition, business economy and the general lack of customer service ( comparatively speaking) is based on the debunked argument of size.
remember i have heard all the same arguments in NZ prior to Telecom being deregulated at cut up, the howls of protest at the time. the result is a much better service much better coverage and services available ( that are unavailable in australia) and its just so much cheeper.

[JDNSW]

........
my point is that as 80% of Australia's population lives in a comparatively high destiny areas and the majority of the rest not being serviced at all. i cant see how the argument of austalias size stacks up cost wise. i do suspect that the lack of competition, business economy and the general lack of customer service ( comparatively speaking) is based on the debunked argument of size.
remember i have heard all the same arguments in NZ prior to Telecom being deregulated at cut up, the howls of protest at the time. the result is a much better service much better coverage and services available ( that are unavailable in australia) and its just so much cheeper.

I think you may have misunderstood part of what I said. For a start, it is not correct to say "most of the rest is not serviced at all". Much of the area of Australia has some service - the USO for example guarantees a "standard phone" service to almost anywhere in the country. This might not be much of a service, but it is very expensive to provide in remote areas, and the same applies to, for example, the cables joining WA and Eastern Australia, or any of the other long hauls between major population centres. There is nothing remotely comparable to these in NZ.

But what I did mean was that a further dampener to competition, is that most of this massive infrastructure is owned by Telstra, and all the other companies have to pay Telstra (under the USO) to maintain it - or else duplicate it, which is even more expensive. And this leaves Telstra able to charge higher prices as they can provide better coverage than anyone else.

John

[clean32]

I think you may have misunderstood part of what I said. For a start, it is not correct to say "most of the rest is not serviced at all". Much of the area of Australia has some service - the USO for example guarantees a "standard phone" service to almost anywhere in the country. This might not be much of a service, but it is very expensive to provide in remote areas, and the same applies to, for example, the cables joining WA and Eastern Australia, or any of the other long hauls between major population centres. There is nothing remotely comparable to these in NZ.

But what I did mean was that a further dampener to competition, is that most of this massive infrastructure is owned by Telstra, and all the other companies have to pay Telstra (under the USO) to maintain it - or else duplicate it, which is even more expensive. And this leaves Telstra able to charge higher prices as they can provide better coverage than anyone else.

John

Ok i think we are missing each others points here. when i said coverage i mean basically every thing other than the old phone. the old phone is referred to as service. no big deal.
you are correct when you say that the distance needing service is much greater in aus than NZ, how ever the cost per KLM in NZ is much more than in AUS due to environment issues.
as for coverage, well thats so cheep now days. 1500 bucks and you can hook up to a bird + Fees.
Now back to my original post. NZ was like aussie with telecom like telstra having a strangle hold on the copper. then the government broke the company up just like the federal government in aussie is doing now. the NZ government also legislated that local calls are free as is always has been in NZ.
now with the opening up of the market ( ihug and telstra payed a role in this) coms changed from copper to sat to optics, now the old copper is still there and being used including the old copper submarine cables. as it will happen here the market will eventually free up and every thing will get cheeper.

[JDNSW]

Certainly the breakup of Telstra should increase competition, and will reduce prices at least for those in the major cities, but is unlikely to do anything for anyone outside the densely populated centres of Brisbane/Sydney/Melbourne/Adelaide/Perth. (anywhere where the average block size exceeds, say, one acre, and town sizes less than perhaps 10,000.)

We can expect fast cheap broadband in those areas, but everyone else will be left with the choice of dialup or satellite, with sporadic patches of better service, but these will not be cheap because the market will not be big enough to support competition. Wireless will not work in the relatively dense population areas because there is simply not enough spectrum to go around, and will only be sporadically and expensively deployed in most low density areas due to the small market size.. The situation is evolving pretty much as I predicted in my submission to the Estens report, with the divide between the digital haves and have nots widening as a result of competition. The situation will probably very gradually improve as technology gets cheaper, but don't hold your breath.

John

[2_door]

you should come to the 'little island'.....there is practically no competition down here and like some have already said, most companies blame freight costs for their over inflated egotistical prices....and thats if they have it in stock, it floors me if you can walk into a shop and they actually have it in stock. Most things take 2 bloody weeks to get from Melbourne and if you push them, they will overnight it for you but you have to pay extra :mad:

after living in Brisbane for 40 odd years, you take it for granted that if one shop doesnt have it or wont haggle, then there are lots more shops in a reasonable distance that will help you.

my 2c worth :p (back off soap box)

[Bigbjorn]

you should come to the 'little island'.....there is practically no competition down here and like some have already said, most companies blame freight costs for their over inflated egotistical prices....and thats if they have it in stock, it floors me if you can walk into a shop and they actually have it in stock. Most things take 2 bloody weeks to get from Melbourne and if you push them, they will overnight it for you but you have to pay extra :mad:

after living in Brisbane for 40 odd years, you take it for granted that if one shop doesnt have it or wont haggle, then there are lots more shops in a reasonable distance that will help you.

my 2c worth :p (back off soap box)

Don't go to any of the engineering suppliers in Brisbane and expect to be able to buy anything other than fast moving items off the shelf. They will show you pictures and offer to get it in.

[Ean Austral]

Darwins been like that for years and still is..Even had people tell me its not a capital city so it doesnt count..must've done different geography at school than I did..I shouldn't complain we actually got harvey Norman a few years ago, so we must be getting there..Oh and we got speed limits outa town now..and demerit points..Hell it might be time to think about moving.
Cheers Ean

[Grockle]

hardly any that's what really **** us when we came to oz...

in saying that though prices are much much more negotiable here so perhaps that's why they don't do it as much....in fact you cant negotiate in the uk..unless you got balls of steel:lol2:

I do Lou,and my balls aren't steel(well I don't think they are):D

[V8Ian]

I do Lou,and my balls aren't steel(well I don't think they are):D
Does it do you any good though, the haggling I mean?:angel:

[Bigbjorn]

Freight costs have been a convenient reason used by rural merchants for ever. I remember by father being taken to task in Winton over freight costs by someone who had a difference of opinion with a local business who blamed freight cost. Dad loudly told the guy(in the crowded Tatts pub) that X gets their stuff at the same rate as everybody else, eight quid a ton, less than a penny a pound.

[JDNSW]

Freight costs have been a convenient reason used by rural merchants for ever. I remember by father being taken to task in Winton over freight costs by someone who had a difference of opinion with a local business who blamed freight cost. Dad loudly told the guy(in the crowded Tatts pub) that X gets their stuff at the same rate as everybody else, eight quid a ton, less than a penny a pound.

The situation is similar to that I suggested with communications. The business in the small town does not have real competition, because the market is too small to support it.

As a result, what he can charge (and get away with) is much higher than what he could if he was in a larger market. But he probably has to have a higher margin than the business in the city, because he has much lower turnover, meaning he has a proportionally larger amount of capital tied up in stock, and probably has proportionally higher costs all round. Just as a simple example locally - the fuel seller in the local village only gets his tanks filled about once a month. Compare that with a city service station that may get fuel twice a day. And getting smaller quantities more often is not an option.

But I agree with Brian - there is a real temptation to put the higher margin down to "transport costs"!

John

[Bigbjorn]

The situation is similar to that I suggested with communications. The business in the small town does not have real competition, because the market is too small to support it.

As a result, what he can charge (and get away with) is much higher than what he could if he was in a larger market. But he probably has to have a higher margin than the business in the city, because he has much lower turnover, meaning he has a proportionally larger amount of capital tied up in stock, and probably has proportionally higher costs all round. Just as a simple example locally - the fuel seller in the local village only gets his tanks filled about once a month. Compare that with a city service station that may get fuel twice a day. And getting smaller quantities more often is not an option.

But I agree with Brian - there is a real temptation to put the higher margin down to "transport costs"!

John

You are dead right, John. The small business in the small town has to have a much higher gross margin than a similar business in a capital or provincial city.
The turnover is normally much lower, often half or less than similar businesses in larger urban areas. If he has 10 staff then he has to make $1,000,000 gross profit per annum just to pay their wages, overtime, penalty rates, leaves various, superannuation, Workers Compensation premiums, payroll tax etc. The proprietor then expects a fair wage for his labour, often 60-70 hours per week, and a return on the capital invested in the business. Therefore he needs a fat margin to survive.

[V8Ian]

You are dead right, John. The small business in the small town has to have a much higher gross margin than a similar business in a capital or provincial city.
The turnover is normally much lower, often half or less than similar businesses in larger urban areas. If he has 10 staff then he has to make $1,000,000 gross profit per annum just to pay their wages, overtime, penalty rates, leaves various, superannuation, Workers Compensation premiums, payroll tax etc. The proprietor then expects a fair wage for his labour, often 60-70 hours per week, and a return on the capital invested in the business. Therefore he needs a fat margin to survive.
Many of the businesses I had dealings with had no idea what an award was! Only paid a pittance.

[JDNSW]

Many of the businesses I had dealings with had no idea what an award was! Only paid a pittance.

Many businesses, (including some not so small ones) have no idea of whether they are losing money or making money on any part of their business, or indeed for the whole business, let alone any other factors. (A prime example of this was British Leyland!)

John

[Bigbjorn]

Many businesses, (including some not so small ones) have no idea of whether they are losing money or making money on any part of their business, or indeed for the whole business, let alone any other factors. (A prime example of this was British Leyland!)

John

Truck owner/drivers and small fleets are classic examples. Ask any of them what their cost per tonne/kilometre is and get a blank stare. Further complicate matters by asking them to split this into running and standing costs.

Spare a thought for the accountants for many small businesses particularly ones that handle a bit of cash. Many are accustomed to taking a lazy spot or three from the till to go to the pub/club/TAB/girlfriend. In the case of one substantial family owned company in Sydney that I sold trucks to, the cash registers would be emptied if the brothers decided to go to the mid-week races. In another one, it was the prerogative of the senior partner to take the cash tin home at night and bring it back in the morning with just the change float. Cash payments never went through the books here.

[AKW]

The freight cost one that gets me is the one clamed on
fuel. There is no way any transport co is getting more
than 1cpl to country areas let alone what the fuel co clam.

Andrew

[Ean Austral]

Wish I could add a fuel surcharge to the price of my prawns , like the frieght companies charge me to transport them..Might improve my bottom line some, but then like most in the primary production industry its the 'middle man'who has the creamy share of the pie.Oh the joy of being in Business.
Cheers Ean

[Grockle]

Does it do you any good though, the haggling I mean?:angel:

I think it does mate, one example, I've got 10% off my R M Williams boots in Ireland,freebies on car deals etc.

[Narangga]

Gday All,This doesn,t only apply to some L/rover stealerships..Was Looking at sending 2 pallets of seafood from Gove to Darwin.Gove is serviced by 1 barge company so thought they might sting me a bit..Boy was I wrong..I can send them from sea using the barge that services our fishery to Cairns, Road frieght them to Brisbane, then road frieght them to Darwin for 18 cents per kilo Cheaper,than Gove -Darwin direct...Makes some L/Rover options look good..Gotta feel for the people who live in Gove,I know there are a few members here from Gove.
Cheers Ean

Have lived in north-east Arnhem Land for the past 19 years. :(

Brought a 20" TV back as luggage on the plane once :p

But not any more :(

[Grockle]

Have lived in north-east Arnhem Land for the past 19 years. :(

Brought a 20" TV back as luggage on the plane once :p

But not any more :(

Does that make you and Derek(dm-td5) neighbours ;)

[Narangga]

Does that make you and Derek(dm-td5) neighbours ;)

Nah - not in Gove. He's at least 500 metres away by road - almost the next suburb really.

[Ean Austral]

Have lived in north-east Arnhem Land for the past 19 years. :(

Brought a 20" TV back as luggage on the plane once :p

But not any more :(
That must've been in the good old Ansett days Stuuu, I took 1200kgs worth of G/box, tools and parts from Darwin to Gove as excess luggage once, but the frieght boss did get some priemium prawns for his wedding.
Cheers Ean

[cookiesa]

lol now thats the way negotiation should be done!

[Narangga]

That must've been in the good old Ansett days Stuuu, I took 1200kgs worth of G/box, tools and parts from Darwin to Gove as excess luggage once, but the frieght boss did get some priemium prawns for his wedding.
Cheers Ean

Ansett days yes - but on Qantas. These days they even weigh the carry on bags.