Leased Line Pricing – The Real Factors That Determine Your Price
Leased line pricing is determined by three key factors: location, bandwidth and contract length.
If you want to find out how these factors impact the cost of your own leased line, visit our leased line pricing tool to get an instant quote.
Here's how those three key factors affect leased line pricing in general...
How LOCATION affects Leased Line Pricing
Some companies are lucky enough to have fibre-optic cable going into the basement of their building. So delivering a leased line using this pre-existing fibre is relatively cheap. There's little physical work to be done.
Not all locations are as well-connected. Some are miles from the existing data networks. If you want a leased line here, you'll have to pay the cost of someone digging up miles of road or pavement - a very expensive undertaking.
Luckily, most businesses are relatively close to existing fibre capacity, so usually, there are only a few tens or hundreds of meters that need to be dug up.
Another reason that location greatly effects leased line pricing is that the lower leased line speeds (2Mb to 10Mb) can sometimes be provided by DSL variants like SDSL, ADSL2+Annex M or EFM over copper, in addition to the usual fibre circuits. However, the availability of these options is limited to premises that are served by about 1100 of the UK's 5600 telephone exchanges. DSL speeds are highly distance dependent, so not all premises served by those exchanges will be able to get the desired speeds.
Your BANDWIDTH REQUIREMENTS affect your Leased Line's Price
Leased Line pricing is affected by whether you're using fibre-optic circuits, or copper ones such as those used by many 'EFM' solutions.
Bandwidth affects the price because it limits the connectivity options. If you want 2Mbit/s, there may be several ways of delivering it. If you want 100Mbit/s, you'll be using fibre. And in much of the country, there are only two fibre networks to choose from, so there's less price competition.
Another reason your bandwidth choice affects your leased line pricing is that higher bandwidths require more expensive equipment. And guess who ends up paying for it? Yes, you do, over the life of your contract.
How CONTRACT LENGTH affects the pricing of Leased Lines
The longer the contract you're willing to sign, the lower your leased line pricing will be.
The reason is that most leased line providers greatly subsidise the installation costs, then recoup their initial losses over the life of your contract by marking up the monthly circuit rental costs.
I'm going to let you into a secret. I'm going to reveal the real economics of a 2MB fibre leased line. For reasons of commercial confidentiality, I can't reveal the exact location, or the actual prices.
I checked out the retail price for a 2Mb leased line, with free installation, on a 36 month contract.
The first 16 months of rental income would just be enough to cover the circuit installation costs.
The next 3.75 months of rental charges would cover the costs of the equipment provided to the customer for free.
The next 12 months of charges would cover the circuit rental costs that were incurred during those (16+3.75+12) months.
The remaining 4.25 months of the contract would be the ones where your provider finally broke into profit. Serious profit. Over 60% of those four months of fees would be profit. However, it's worth remembering that this gross profit has to contribute towards the cost of providing 36 months of 24×7 support, so the real profit is far lower.
On larger circuits, there is far less of an installation subsidy, and a far lower margin is added to the circuit rental costs. For example, about 2 months of your monthly rental charges might go on the installation charge. About a month of charges might go on the Customer Premises Equipment (that router they sent you). Then about 5 months of charges would pay for the circuit rental costs for those (2 + 1 + 5) months. There is then about a 35% gross profit margin for the remaining 28 months of the contract. However, the actual profits are far lower, as your provider has to cover the costs of providing 24×7 support, co-locating its networking equipment in major data centres and upgrading its core network every few years.
How to Get Real-Time Leased Line Pricing
You can find out how much your dedicated connection should cost by visiting our leased line price checker. It compares quotes from a variety of different providers, to find you the best price.
