Project Description

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Leased Line Costs

Leased line costs… how are they calculated?

The cost of a leased line is split into 2 discrete components. 1. the rental charge which is a fixed monthly or quarterly charge 2. the set up fee which is a one-off installation charge.

The most important factors affecting the charges are:

  1. the distance from your location to the nearest point of presence (POP) of the service provider
  2. the speed of service that you require eg. 10mb or 100mb

A leased line site survey will firm up these costs. Any quotes provided prior to a site survey are indicative leased line costs.

leased line cost

How does location affect leased line pricing?

The pricing of a leased line for your business is entirely bespoke. This is because your location, and building will be significant factors in determining the costs.

Remote areas typically pay higher installation charges and rental fees that inner city locations. This is because: 1. the location is usually further from the nearest POP 2. there is less provider competition 3. often fibre is not already installed in the building

For an inner city location a 10mb leased line should cost in the region of £200-300/month. For a remote location this could be in excess of £1000/month.

Some companies are already “on net”. This means they already have fibre installed in their building. In this circumstance leased line costs are significantly lower. This is because there’s not much work required to deliver the fibre service.

Some Companies, especially remote businesses are not as lucky. If you happen to be several miles from a data network costs to dig a fibre to your business can be very high. Often in excess of £10,000!

The vast majority of UK businesses are within a few metres of the existing UK fibre optic networks. Often the carrier will subsidise the connection in these cases.

Lower leased line speeds (2Mb to 10Mb) can often be provided over new technology such as EFM. This vastly reduces costs as the leased line will use the existing network connecting the UK’s 5600 telephone exchanges.

Will signing a longer term contract reduce my leased line costs?

There is a direct relationship between length of contract and contract cost. The longer the contract you commit to the lower the leased line costs will be.

There is a simple reason behind this. The leased line provider will amortise the installation cost of the leased line over the contract length.

If we look at a 10Mb leased line on a 3 year contract as an example. The profit in the first 18 months of a contract will cover the free installation fee offered. the next 3 months profit covers the cost of providing the free router. 8 further months of profit cover the cost of providing the service. This leaves the final 4 months rental profit at around 55% gross margin.

 

leased line bandwith costs

How does bandwidth speed affect leased line pricing?

Bandwidth affects the price for 2 main reasons:

  1. bandwidth is a cost to the carrier – the usage of bandwidth is a core carrier cost, so the more you use the higher your charges will be.
  2. bandwidth speed has a bearing on your technology options. Low speed leased lines (2mb – 10mb) can be provided over copper and ethernet as well as fibre. 100mb leased lines have to be delivered over fibre end-to-end. There’s less price competition for 100% fibre networks so they are more expensive.

If you require a high speed fibre leased line 100mb + the equipment used to deliver the service will be more expensive. This is also reflected in a higher contract cost.

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FAQs

What does a leased line cost?

You need a bespoke quotation. This depends on your location, the speed you require and the term of the contract you are prepared to sign.

Can I get a leased line for under £100?

This is not typically possible for any type of leased line.
Occasionally it does happen.  i.e. Virgin Media owns the entire fibre cabling network within a building already and can thus simply partition bandwidth amount for a new customer.
Normally a leased line will cost you minimally £150 per month on a circuit such as EFM or GEA.

Why is it so expensive for a leased line in one location but not in another location?

The general cost of a leased line often depends upon certain physical factors. If a location is far from a major network and a POP (point of presence) then it may be more costly to join the location in question to the major network. If however a location is more central and closer to the major network along with several Carriers being in existence then it is likely that the cost of a leased line will be lower.

How come my neighbour is only being charged £287 per month for their leased line but I am being quoted £430 per month and they are only next door?

This could be due to a number of reasons.  It may be wise to ask your provider this question. However it could be a simple case of being charged more by a different ISP due them having a different pricing structure. Equally, the infrastructure could be different even as close by as an immediate neighbour. It may also be a good idea to make sure that when somebody suggests that they are getting a much cheaper leased line to make certain that the two leased lines in question are the same technology.

If I pay more money, either as part of the installation or as part of the monthly fee, can a leased line be installed any quicker?

In some situations it is possible to expedite an installation. If the Carrier/Provider has this capability it will be a costly exercise with no guarantees of a significantly faster lead time.
The general advice is that it is not possible to pay more for a quicker installation. This said, choice of provider can enhance delivery time as some providers are more efficient at conducting this process.

Why is fibre ethernet more expensive than say EFM or GEA?

This is because it is fibre all the way from carrier to customer.  Often it is a fresh installation, as opposed to being based upon entirely existing infrastructure. The transmission equipment is more expensive. Also, you are able to pick any bandwidth level you wish as a starting point and you are able to upgrade the bandwidth level over time should you need to. Fibre Ethernet will always achieve much higher CDR’s than EFM or GEA.

Is it expensive to incrementally increase my bandwidth if on a fibre ethernet circuit?

Typically, the incremental fee increase for a higher bandwidth should not be too dramatic.
The increase can often be between £15 – £20 for each 10Mbps increment. The monthly fee increase is dictated by the operating cost of the leased line and also provider’s pricing structure.

Why is EFM typically more expensive than GEA?

The cost of supporting an older product and infrastructure, such as EFM on a fully copper network, is higher than installing and supporting a predominantly fibre network such as GEA.

Do I have to pay for the Site Survey?

The only time you would be required to pay for a Site Survey would be: if the order progressed to Site Survey, no ECC’s were presented, but you still wished to cancel. At this point you may be liable for the cost of the survey. It is generally in the region of £250-£400.

What does 'On-Net' mean and how does this normally affect the cost of a leased line?

It depends upon the infrastructure to some extent as everyone has a slightly different understanding of the term. However broadly speaking if Virgin Media are ‘On-Net’ it will typically mean that the location for the proposed service is no more than 100m from any existing Virgin Media infrastructure.

Am I able to negotiate a lower monthly fee mid contract term?

There is always the opportunity to negotiate with your provider mid-term. However it is often required that you start a new contract term to obtain a lower monthly fee moving forwards.

If I want to cancel my leased line contract before the end date, will it generally cost me a lot to do so?

This depends largely on when you are planning to cancel. Most providers will require you to pay for all monthly fees remaining on the contract at the point of cancellation i.e. if on a 36 month term you cancel at the 18 month mark, you will be liable for 18 months fees.

Will any one-off upgrade fees be presented if I want to increase my bandwidth, say from 30/100Mbps to 40/100Mbps?

This fee presented or not is usually dependent on the Carrier. It is not unusual to have to pay for an upgrade fee and can be in the region of £250-£400. Of course this is not always the case. Some providers will simply amortise this fee into any monthly costs.

Apart from monthly fees and potential initial setup fees are there any other costs involved in a leased line installation?

It is possible that, in addition to monthly fees and initial install fees, as a result of the Site Survey, Excess Construction Charges (ECC’s) may also be applied.

If no ECC's (Excess Construction Charges) have been presented at Site Survey will I be liable for any other additional costs?

It would be very unlikely for any other charges to be presented post Site Survey if no ECC’s were applicable at that point. This really is the whole point of the survey. It is designed to assess how easy or difficult, thus how cheap or expensive, an installation is going to be.

Can my monthly fees be altered by the provider at any point in the contract?

It would be sensible to check the terms and conditions of your contract. Some leased line contracts will stipulate that the provider can change the monthly fee as and when they wish for whatever purpose, of course come contracts will not include this clause.

If I pay more for my monthly fees can I get more bandwidth on EFM or GEA?

It is often possible to increase the bandwidth on EFM if you are currently not using all pairs available, thus if you were on a 2-Pair EFM circuit you may be able to pay more to utilise a 4-Pair circuit which in theory would give you more bandwidth. This is typically not the same for GEA as it will usually deliver the maximum bandwidth available at a set monthly rate.

Is it normal to be presented with initial setup fees on a 36 month term?

This very much depends on the type of leased line circuit you are considering. Most providers will not charge an initial setup fee for EFM, GEA or Fibre Ethernet on a 36 month term. A 12 month term on all these services will normally incur an initial setup fee.

Will it be cheaper if our landlord supplies us with a portion of the building's leased line connection, rather than us installing our own pipe?

It is very hard to give a definitive answer on this as some landlords will charge a lot for a portion of their leased line connection and some landlords will not. Equally, it is dependent upon the location and the existing infrastructure in the area etc which will dictate whether a fresh installation into a building would be cheaper than renting some bandwidth internally from the landlord. Our advice would be to obtain costings for both scenarios and compare them.

How many static IP addresses would normally be included in the monthly fee of a leased line?

Most providers currently would supply between 4 and 8 (1 and 5 usable) static IP addresses inclusive, any more would probably require a small monthly fee and a justification via RIPE.

Do leased line costs come down significantly over time and if so by how much each year?

It is often hard to accurately predict what the market is likely to do in the future but certainly in general leased line prices have come down in recent years. The prediction is that this trend is likely to continue, as competition and technology drives down prices. However it’s not possible to predict a % reduction in leased line costs per annum.

If I took out a 5 year term would it be cheaper than a 3 year term?

There is a slight myth surrounding 5 year terms. Many people assume that a progressively longer contract will yield progressively lower fees. This is not necessarily correct. The wholesale cost is actually no different between a 3 year term and a 5 year term. So for the carrier there is no operational cost benefit to the end user being placed on a 5 year term.
There is of course still a benefit to being on a 3 year term compared to a 12 month term, from a monthly fee and installation fee perspective. We have noticed in recent months that really only BT will ever put forward a 5 year term.

Why are there typically never any initial setup fees on a 36 month+ contract term?

This is largely due to the fact that a longer contract will generate more revenue for a provider and as such any installation fees can generally be amortised into the monthly fee presented.