A service launched yesterday which will aggregate National Broadband Network capacity across Australia was “no magic bullet” which would completely resolve perceived issues with the NBN’s pricing model, according to Internode managing director Simon Hackett.
The service launched by wholesale and fibre telco Nextgen Networks will combine its own national fibre network and points of presence with a direct connection to the National Broadband Network Company’s own fast-growing networks, allowing small to medium ISPs with a presence in a single datacentre to provide services across the whole NBN.
The launch of the product is already being seen as going some way towards addressing complaints by industry players such as Internode that NBN Co’s pricing model would prove too expensive to allow smaller ISPs to compete in an NBN world.
In an emailed statement yesterday, Internode’s Hackett noted his company was a major and long-term Nextgen customer already, and was evaluating the telco’s offering (alongside offers from other potential aggregators) to cover the part of the NBN between its core and its points of interconnect (PoIs) scattered around the nation where Internode didn’t already have its own infrastructure.
However, he added, Nextgen’s solution only represented half of the NBN pricing puzzle.
“One is backhaul from 121 POI’s to where ISPs’ core infrastructure is; The other is about the NBN Co pricing model from those PoIs onward to customers,” said Hackett. “The announced NextGen aggregation service is an instance of wholesale aggregation for the first of those two pieces.”
“But its not the magic bullet in and of itself, as (a) it covers half of the issue (the piece external to the NBN Co pricing model) and (b) in the end, in both the core-to-PoI paths and the NBN Co pricing model itself, it is, of course, all about the price.”
Hackett said his point was that the cost for ISP traffic to get from core networks to the PoIs would be additional to the existing NBN Co wholesale costs — which were also additional to “existing underlying cost structures for the industry”. As such, whatever fees an NBN aggregator like Nextgen charged would need to be factored into the resulting end user retail prices to actual ISP customers.
“If one had infinite funds,” Hackett added, “Telstra would be a viable supplier here, for instance – except of course nobody does have infinite funds).”
The Internode MD noted it was “early days” for aggregation offerings such as the one Nextgen announced yesterday, and he was sure the company’s offering wouldn’t be the only such to launch in the coming months.
“Given that we’re still a year or two away from many of those POI’s actually being in existence, this is still very much early days for the story – with a lot left to unfold,” he said.
Image credit: Internode
Simon really, really needs to get over the fact that the NBN is not being structured in such a way as to best benefit himself and his company. He’s done several significant things for the betterment of the internet in Australia, but what best suits Australian internet users is not automatically what suits Simon.
The ACCC’s decision to mandate so many POIs was taken to defend a segment of the market that would otherwise be damaged. I don’t think it was the best solution, but I understand the reasoning. Simon needs to accept that this is the new reality and deal with it, instead of constantly carrying on about a decision that’s not his to make, has been made, and isn’t going to be changed regardless of the noise he makes.
The “complaints from industry players” seem to be mostly Simon, supplemented by the occasional “yeah, us too” from hangers-on.
hes not concerned about ‘his own company’. hes said it at least a few times that Internode is at a size where it can pay for those network costs and field a national network on NBN. but given internode only grows organically – he doesnt do mergers etc – he has direct and recent experience with being a ‘small isp’ and that is the mob he has been primarily concerned about.
One of the stated policy aims from Conroy for the NBN was to enhance competition among retailers. Simons argument is the policy has the opposite effect – that there will be a large reduction in the number of service providers on offer to consumers, by virtue of the fact they cant afford to field more than a chunk or two (POI or two) of the ‘national’ network. i dont personally have a problem with the idea that more people to choose from for your service is a bad thing, but i do have a problem when – from the many many providers on offer now – that gets whittled down to the top 5 or 6 or so who can afford to play in the national market.
now the nextgen offering probably is going to be useful. whether those small isps using nextgen and the like are stil able to make access available to more than a chunk or two of the finished market is an unanswered question. Simon just happens to be asking the question on a ‘is this a good policy and outcome’ basis, from the vantage point of someone been involved in the market for a long long time.
its less about his own company than it is about industry engagement with the govt to make sure the NBN is structured so that it can deliver on what it was sold to us – as a fix for distortions in the market and a competition enabler, in the retail space. I dont think its a bad thing for someone to be involved asking those questions of the government, if anything it is healthy for a government to be queried by those who will be affected by its policies. Even if they happen to own a business affected by big changes in the way the Govt is doing things.
Great response.. it will be completely lost on most people – but great nonetheless.
you’ll pardon me if I find it difficult to believe in Simon’s selfless altrusim.
I’ve been a long term user of Internode and on-net in Oz since 1993. I’ve seen a lot in that time. Frankly I would trust what Simon Hackett had to say a whole lot more than “Scott P” who simply seeks to play the man. You wouldn’t work for a bloke called Conroy, would ya?
Can’t say I’m surprised at this.
Same.
I really admire Simon, and his ability to see multiple “paths” through problems to reach solutions, but I tend to agree with the OP that it is probably time to accept that jumping up and down now is not going to achieve much.
It might be able to be changed in the future if the current model proves to be less than ideal, but again as the OP suggested, the NBN isn’t designed to appease Internode, and Internode alone. Ducking around and changing things willy nilly before we’ve really seen how the current pricing will work will actually waste more time getting the whole show up and running, as everything will have to be reworked and go through the four-month ACCC process all over again.
It’ll cost six months or more, at the very least.
This is what we’ve got for now – lets see how it pans out across the entire industry first. It might not work out, but you have to start somewhere.
No matter what the pricing plan is, there will always be someone who it doesn’t suit. In its current form, it is Internode making the most noise – and Simon has every right to do that. His job is to try and do the best he can for Internode and its shareholders – all praise to him.
It’s time to get on with the job.
Michael, same as my post above, mostly. i do agree with some of what you say tho. i dont agree its about jumping up and down and appeasement, but i do think its probably at the point where we take a breather and see whats happening for a bit. 6 months wont get very much NBN built so small ISPs have some grace time, but if Simon is right and it is bad for them it certainly should be revisited. as above i think there is a place for query of governmental policy, and whether the answer satisfies the asker is less important than the questions BE asked.
BTW internode being private doesnt really have shareholders in the ASX style of thing. however it is internally divvied up (if at all) Simon has 100% control of the thing anyway :)
Simon has 100% control of the thing anyway
Exactly what I meant… :o)
The CVC pricing model is regressive and unnecessary. It will cause 95% of the gigantic FTTH network to be completely unused. No other wholesale network in the world has “contention charges”.
Providers still have tiers of different sized caps. With an FTTH network caps are completely unnecessary. As long as international transit costs keep falling bandwidth should be exceedingly cheap. In fact I’ve never heard of a single FTTH deployment in the world that was hampered by caps, even in rural America.
How can you boast of the advantages of a fiber network when you’re paralyzing it with caps and CVC?
Ubiquitous, nationwide IPTV services will be impossible with caps. Cloud services like OnLive, Netflix, and Steam will also have serious problems acquiring a foothold in the market. The caps must be eliminated.
As volumes grow on the NBN side of the network costs will fall. Its the nature of the beast. As other wholesale providers such as NextGen pop up costs will fall. Win/Win for all.
what Nextgen is offering doesn’t solve anything.
the central issue in terms of price competitiveness between the large ISPs with huge subscriber bases and the small ISPs revolves around the “aggregation economies”.
there are two dimensions to these “aggregation economies”:
(i) firstly, the “burst capacity overhead” created by introducing a wholesale toll on data, i.e. the $20/Mbps CVC charge (internal to the NBN);
(ii) secondly, the much smaller capacity toll on national backhaul (external to the NBN).
the service that Nextgen is offering is merely a “backhaul aggregation service”. this was never the biggest problem because there is competitive backhaul at most of the major PoIs. all Nextgen is doing is offering a packaged solution that offers backhaul to every PoI on a “single (aggregated) account”, thereby, potentially saving RSPs the hassle of having to do multiple backhaul deals with multiple backhaul providers.
furthermore, the PoIs served by more expensive backhaul will always be more expensive to access. there’s no suggestion that Nextgen will impose “uniform backhaul pricing” across all PoIs back to a single PoP. hence, the concerns about the attainability of “uniform national retail pricing” in terms of urban vs regional still remain.
the real problem is the “internal capacity toll” enforced by NBNco. firstly, there’s no way of “by-passing” the CVC charge unlike Telstra’s AVGC charge. secondly, the NBNco’s “internal backhaul charge” is an impost of an order of magnitude much greater than the typical rates incurred on “genuine backhaul” external to the NBN. (this is not suprising as the CVC charge is actually NBNco’s mechanism to recover the cost of re-laying the super-expensive last-mile access network.)
small RSPs will still need to resort to the services of a “CVC capacity aggregator” to neutralise the competitive disadvantages or capacity diseconomies of serving small subscriber bases.
Sounds exactly what Hackett is trying to say and why everyone is in agreement that the CVC charges are too high at $20/Mbit.
I don’t think NBNCo needs CVC to recoup their costs. They could increase AVC just a few dollars.
And yes, $20/mbit for CVC is insanely high. It’s like they’re living in the 00’s.
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