iiNet blames wholesaler for high estate fibre prices

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news A spat between fibre-optic wholesaler Opticomm and retail ISPs iiNet and Internode has broken out online after the company was forced to defend claims that the prices it charges for access to its infrastructure in new estates are significantly higher than that ISPs pay for access to fibre under the National Broadband Network.

Opticomm is one of a handful of companies building fibre to the home solutions in certain locations around Australia. In general, NBN Co will work with the companies to ensure the NBN does not overbuild in areas that they cover. So far, Opticomm has laid fibre in several dozen housing estates around Australia.

However, in a discussion which had taken place over the past month on broadband forum Whirlpool, a number of aggrieved customers pointed out retail prices over the infrastructure provided through ISPs like iiNet and Internode were dramatically more expensive than similar plans on NBN infrastructure.

The maximum download limit which iiNet allows over Opticomm’s infrastructure, for example, is a 90GB/90GB off- and on-peak plan at 100MBps for $159.95. But for just $99.95 per month, customers can get a 100Mbps NBN plan with a whopping 500GB/500GB worth of quota. Similar massive pricing differences exist on Internode’s plans.

“Opticomm charges more than NBN. What’s the mystery?” wrote iiNet chief executive Michael Malone on Whirlpool, in reaction to customer complaints on the issue.

Internode representative Michael Kratz noted in early October that the ISP had “some improvements” in the pipeline for the fibre estate plans, but couldn’t give a date for the new plans to land. “I will say: they won’t be the same as the NBN plans, but they will have Fibre Power and Business packs,” he said, referring to add-on features Internode offers with other plans.

However, Opticomm general manager of operations Stephen Davies was having none of Malone’s criticism. “Hi Michael, I am sorry to say that is incorrect,” he wrote. “The particular point most of the posters are raising is not about the access speeds, but about the lack of download quota – something which Opticomm has zero control or influence over.”

Davies stated that NBN Co charged ISPs $24 per month per end user for the access virtual circuit component of its network charge for a 12Mbps connection, compared with $20 per month for both the AVC and backhaul connectivity virtual circuit charge equivalent for a 25Mbps service. “If we put aside the wholesale charges (which all can see Opticomm is cheaper) why the difference on the quota, when the quota is entirely influenced by iiet domestic and international purchasing capability?” asked Davies. “Perhaps give us a call next week and we can discuss,” he told Malone.

In a later thread, Davies clarified that it wasn’t his intention to “bag” the ISPs — “who work with us extremely well”. “[Retail service providers] have their own reasons — which I am sure are justified — to charge whatever retail prices they like,” he wrote. “The reason I responded was to counteract a number of statements which were claiming the reason for the price difference between FTTH via NBNco and FTTH via Opticomm was due to Opticomm charging higher prices.”

However, Davies did note that as a company, Opticomm in general didn’t think much of the Government’s NBN project as a whole.

“… it’s the opinion of the company that I work for, not just my opinion. While Opticomm fully supports the Government’s National Broadband Network policy – the implementation by NBNco has in our opinion been a failure and will continue to be a failure,” he wrote.

Davies said considering most of Opticomm’s staff had been building fibre to the home networks for more than eight years and had visited many such installations around the world, they were suitably experienced to know “what works and what does not”.

“It’s not unprofessional for me to state an opinion that NBN Co will not survive in its current form (and particularly with the political atmosphere),” he added. “It may well be an unpopular opinion with most on this forum, but we are entitled to our opinions and I think we are in a better position than most in Australia to offer that opinion. What everyone needs to understand is that NBN Co is NOT ‘The NBN” policy’, and as I said before we fully support the notion of a National Broadband Network, just not how it’s being implemented by NBN Co.”

opinion/analysis
Put simply, there must be a reason why iiNet and Internode are so far charging such outlandish prices for access to Opticomm’s infrastructure, and I do believe Michael Malone when he says the company’s pricing is more expensive than NBN Co’s — after all, what reason does the iiNet CEO have to lie in a public forum about this kind of stuff?

However, I also think that with the scale of users that both iiNet and Internode have, that they should be able to negotiate better prices from Opticomm here. Is Opticomm really in a position of power? Sure, it may be the only broadband provider in the new housing estates it’s servicing. But it’s still a tiny company compared with the retail ISPs. I’m sure a better solution can be worked out here.

It is also possible that part of the reason that the ISPs’ prices are so high in the new housing estates is that they may be charging end users the same prices to access estates fibred by Telstra (Point Cook in Victoria being an example) as they are to access estates fibred by others like Opticomm.

So, for example, iiNet and Internode might have bundled up ‘all fibred housing estates’ into one overarching set of pricing plans, based on the worst possible scenario that Telstra is the wholesale provider — when in fact, they may be getting better terms in some individual estates. I’m not quite sure to what extent this is the case, but it certainly would help explain things.

Image credit: Shinkai, Creative Commons

39 COMMENTS

  1. and what does that have to do with Manny “Pacman” Pacquio flooring Ricky “Hitman” Hatton?

      • but the picture showing KO implies outright victory by one pugilist over the other, whereas what we have on WP is one CEO contradicting one MD, and neither party has retracted their claims and conceded error.

        *I do believe Michael Malone when he says the company’s pricing is more expensive than NBN Co’s — after all, what reason does the iiNet CEO have to lie in a public forum about this kind of stuff?*

        are you implying Opticomm is lying? :P

        • I\’m not going to argue about the semantics of an image metaphor.

          And I don\’t think Opticomm is lying outright, no. But I do not think they are disclosing the whole picture on pricing either.

          • Thats a good point, I didnt think of it till reading your comment but pricing is more than a monthly charge.

            There would(presumably) be activation fees/charge, varying contract terms, potentially de-activation or no fault-found repairs which are charged back to IINet or the ISP.

          • QUOTE:

            ^^^^^Davies stated that NBN Co charged ISPs $24 per month per end user for the access virtual circuit component of its network charge for a 12Mbps connection, compared with $20 per month for both the AVC and backhaul connectivity virtual circuit charge equivalent for a 25Mbps service. “If we put aside the wholesale charges (which all can see Opticomm is cheaper) why the difference on the quota, when the quota is entirely influenced by iiet domestic and international purchasing capability?”^^^^^

            what Stephen Davies is trying to argue is that the cost of provisioning “quota” is tied to “variable bandwidth charges”, i.e. access network CVC plus domestic & international IP.

            it appears that Opticomm only charges a flat $20/mth for both AVC and backhaul to POI, with no other variable bandwidth charges.

            hence, in the case of Opticomm estates, the incremental cost of provisioning higher quotas can only be attributed to domestic & international IP , and not wholesale charges set by Opticomm.

            since these transit charges external to Opticomm’s access network are similarly incurred for NBN estates and NBN has a variable CVC charge, on the contrary, one would expect iiNet’s plan pricing to be cheaper for Opticomm than for NBN.

  2. try to be more diplomatic and understanding.

    how many journalists do you know facilitate and encourage a completely open forum which allows anybody (using pseudonyms) to dissect and criticise everything they publish in real-time with zero censorship?

    don’t forget, this forum wouldn’t exist in the first place without RLM.

    :)

    • Heh FYI for those who are confused by Tosh’s comment here, it was in reply to two previous comments, one by a banned Delimiter troll, which I deleted because they were offensive and didn’t address the debate.

  3. “one overarching set of pricing plans, based on the worst possible scenario that Telstra is the wholesale provider”

    that’s not convincing … I should think both iiNet and Internode are able to tell the difference between Opticomm and Telstra

  4. Opticomm is just trying to bank much money as possible before it gets raped by the NBN and everyone jumps ship.

  5. “It is also possible that part of the reason that the ISPs’ prices are so high in the new housing estates is that they may be charging end users the same prices to access estates fibred by Telstra”

    This isn’t the case, at least with Internode.

    They have different plans according to how they provide the services:

    http://www.internode.on.net/residential/fibre_to_the_home/

  6. This is what happens when the private sector builds FTTH – you get ripped off.
    Better to have regulated NBN prices.

  7. Renai,

    This is what happens when a commercial company is able to set pricing.

    When you ask “is opticomm in a position of power” the answer is, absolutely, yes. Because at the end of the day, they are simply emulating Telstra — you will pay, what we ask you to pay, or you can f**k off.

    That Opticomm are 100% happy to claim the NBN is a crock of proverbial, given they are for all intents a competitor, why on earth would that surprise?

    Here’s the thing. They are banking as much as possible, while they can. Hardly surprising.

    And as always, the end consumer suffers as a consequence.

    • Exactly, an unregulated private monopoly will price the maximum the (captive) market will bear.
      At least the NBN is a regulated monolpoly with (I believe) a maximum profit margin of 7%.

      Will the NBN eventualyl buy the infrastructure from this company as part of the standardisation of service provision?

      • In fairness to iiNet, I’d say it’s Internode who are the serial whingers more than iiNet.
        iiNet have their odd dummy spit now and then but it’s Hackett who (given the oppurtunity) is constantly whining and whinging about anything and everything.

        • When Simon makes a complaint, it tends to be well supported by the facts, and often changes occur. For example NBNCo providing 150Mbps of CVC free during the startup phase of each POI.

  8. Iinet & internode should just close up shop ,if it not Telstra they blame for pricing it someone else. They are they only 2 companys that are forever crying & crying

    • And that would leave us with the likes of Dodo and TPG. If I get the NBN and pay for 100Mb/s I’d like to be able to achieve more than 100KB/s of an evening.

  9. “The particular point most of the posters are raising is not about the access speeds, but about the lack of download quota – something which Opticomm has zero control or influence over.”

    This is crap. ISP’s set download quota and the monthly cost of those plans based how much traffic they can pull through the aggregated circuited between the ISP and Opticomm. If it is expensive to pull data through this aggregation circuit, download quota’s will be less and plans will be higher in price.

    Opticomm really have no idea what they are doing. Just recently on the 27th of October they performed planned maintenance on one of the estates in QLD. Since this planned maintenance, telephone services haven’t been working. It has been over a week now and services are still not restored. Hundreds of end users have been without a working telephone service for a week! The Opticomm NOC is pretty useless and isn’t following it up or doing anything about the faults that ISPs are submitting. When you perform network maintenance you develop a backout procedure if things don’t work and a testing strategy to ensure things are working after the maintenance.

    It seems there is nothing that Flopticomm, I mean Opticomm can do right.

    • It is curious that they criticise NBNCo’s “implementation” when it sounds like, from cases like this, their “implementation” may itself be flawed.

      Actually no, it isn’t curious. Opticomm opposes the NBN because the NBN is going to roll out in greenfields where Opticomm wanted to roll out, as well as some obvious political motivations. Tough luck.

  10. Iinet and internode blame telstra for their high prices , now they are blaming Opticomm for having high prices.

    Even though im not denying Telstra may charge higher prices , but internode and iinet are reminding me of petrol stations not competing against each other in having competitive prices, and blaming their wholesaler for the prices being high, yet they have shown they can offer cheaper prices.

    Take isps like tpg they are offering fair prices ,

    This is where the Accc needs to take some blame for allowing isps to use this loophole

    • Jason, you’ll find that different ISPs offer different products and also different levels of service. This last point is where a lot of price differentiation comes in. When I talk service, I not only mean access to technical support at different times of day, but also of the contention ratio the ISP applies to it’s customers, the amount of backhaul, access to overseas links etc. Generally speaking the more you pay, the better your experience with the company (note generally speaking: Bigpong maybe the exception).

      Internode is definitely in the top tier of premium providers. Their customer experience is fantastic, as evidenced by it’s performance in the yearly broadband satisfaction poll conducted by WP. Hence, you pay a little extra for that.

      • Yes but iinet and internode arent even trying to compete against each other or looking to compete that is my point

        Like the petrol stations who have higher prices then the rest of the competition and using the excuse of the wholesaler charge

        • Why do you say they aren’t competing? They may be cutting their prices to the bone. Not every ISP wants to underprovion their network and have at lot of their customers complaining about slow evening speeds to shave some $ off their plan prices. Viva la difference.

          • Why are they complaining then, no one is forcing them to use the 2 wholesalers , iinet is a bigger company then internode , so you wonder what their agenda is.

          • the evil twins are playing a political game…. they are trying to manipulate public and media perceptions for longer term strategic purposes… by deliberately misportraying NBN cost and pricing models…

            in their fantasy world, WDSL, Telstra Velocity and other FTTH estates would be declared by the ACCC… also, they want to position artificial NBN pricing (viz. mere $33 ARPU in nascent years of NBN roll-out but sharply rising thereafter) as a “sustainable” pricing (or wholesale access cost) benchmark for all access networks in Australia…

            of course, in reality, if the ACCC were to cap wholesale ARPU at $33, no new access networks would get built at all. this is why FTTH builds are mostly confined to unregulated greenfield estates, where telcos or network builders retain the commercial flexibility to adopt pricing strategies that allow them to recoup their cost of capital.

            look at Internode’s ridiculous demand that Telstra price the newly-laid South Brisbane fibre at prices equivalent to artificially-low NBN pricing. it’s precisely this kind of greedy, extreme demands by resellers (which don’t build any networks and incur any capital risk) that make it financially difficult for telco incumbents to upgrade fixed networks in existing (non-greenfield) estates.

          • Interesting points tosh, i agree with

            this is where the accc needs to stand firm against these isps, The accc is called Australian consumer and competition commission

            they need to do more for the consumer and not allow the isps to use them as a money earner

            How is it fair for the consumer when isps like iinet and internode charging high prices , yet can use the excuse of the wholesaler.

          • “make it financially difficult for telco incumbents to upgrade fixed networks in existing (non-greenfield) estates”

            Just imagine if it were worse and competing companies could lay their own fibre too. There would be huge downward pressure on prices and with competing infrastructure. With two companies you would only average 50% saturation, 33% if three companies. Or one could win and the others loose the money they invested in their infrastructure, so they would have to lower it below cost to try and recoup some money. Oh wait a sec, that is what you SAY you want. That sort of competition. Wierd, most of the posts seem to only mention one company rolling out in any area and being free to charge what they like to get a return on their investment…

  11. It’s interesting that no matter who owns the infrastructure, those that want to use it want it for next to nothing. In reality Telstra has been bagged for years about its wholesale pricing and now these other companies are copping the same. One wonders if some of these companies like iiNet and Internode have any idea what the real costs are to put this infrastructure in place. It’s also interesting neither company has spent a cent putting in their own cable infrastructure in place, but whinge like shit about its cost to use.

    • “One wonders if some of these companies like iiNet and Internode have any idea what the real costs are to put this infrastructure in place.”

      They do, they have.

      Why is it outlandish to think a private enterprise might be pricing fibre connectivity — which doesn’t seem to be regulated (outside of basic trade practices) — at a high rate?

      Why are we even presuming the supplier is perfectly innocent and is not even remotely trying to profit from their investment?

      This is what happens when you assume.

    • One thing pointing to too high a wholesale price is when an ISP puts their own equipment in an exchange. It costs them less to use that equipment than the Telstra DSLAMs and that is reflected in the lower prices of plans on their own, non Telstra DSLAMs. AND they manage to cover the investment in as little as 18 months. Now how many times over must Telstra have covered their DSLAM investment?

  12. There is an obvious trade-off when using CVC and AVC pricing and changing them, similar with Opticomm’s version of it.

    It’s a no easy fix, short or long time, despited what Mathew and tosh and co think.

    In terms of NBN CVC, leave it how it is, and see what the market plays out as….

  13. Both RSPs know that new estate customers have no other option than getting services from them.

    It is very hard to know the whole story but if Opticomm is charging RSP flat layer 2 rates to their nearest Poi, then the problem is simple.

    The developer or body corporate needs to get involved. RSP need to meet NBN standards and pricing.

    Private investment is the best solution but needs regulation to ensure fairness and equality.

  14. The cost of Opticomm ports (including back haul) are less than NBNCo ports (without back haul) – in fact back haul costs become cheaper pr gbyte the more the customer downloads in contrast to all other models (including the NBNCo) where it is more expensive the more the customer down loads.

    Despite your comment in your article this is an incontrovertible truth.

    Why would anyone “lie on a public forum”? Why would anyone lie in a court room witness box? Only each individual would know the answer to your question – no-one else – assuming it was the case.

    Opticomm have also reduced the ‘current’ costs and made more speeds available – presumably to stay competitive with NBNCo current pricing but, for whatever reason, increasing the cost advantage offered to wholesale customers over NBNCo services.

    One disadvantage of the Opticomm service is that the wholesale customer cannot control the provisioning of the back haul as with ADSL services – though that is equally true with NBNCo back hauls.

    With IP now costing sub 10 cents per gbyte for all but the least efficient of ISPs Opticomm services should be able to be offered by wholesalers at far lower prices than those currently on the public record from NBNCo.

  15. Here is plan, why don’t Internode and iiNet jointly roll out FTTH into Greenfield estates in competition with Telstra and Opticomm.

    Then they can show us how easy it is to undercut both on wholesale pricing to ISP’s and still make a nice return on the cost of the rollout.

    • “Here is plan, why don’t Internode and iiNet jointly roll out FTTH into Greenfield estates in competition with Telstra and Opticomm.”

      I don’t even..

      Both Internode/ iiNet have already deployed a near end-to-end ADSL network (last mile copper notwithstanding). Both wholesale. Both seem to be able to do so without extorting their customers.

      Your rapacious capacity to ignore facts as and when it suits would be breathtaking, if it wasn’t so patently obvious.

      • Brendan,

        You clearly dont know what you are talking about, and as with many of the “arm chair” experts that exist because of blogging these days, you are completely wrong on all accounts.

        John Linton is the CEO of Exetel, are they not one of Opticomm’s RSPs? Reading what John has said, “The cost of Opticomm ports (including back haul) are less than NBNCo ports (without back haul”

        and that Opticomm’s backhaul is “cheaper pr[sic] gbyte the more the customer downloads in contrast to all other models (like NBNco)” also refutes Yoshi’s claim as well.

        “Both Internode/ iiNet have already deployed a near end-to-end ADSL network (last mile copper notwithstanding).”

        iiNet and Internode have not had to build the exchanges, the power systems, the backup systems, the conduits, the cable, nor do the customer connection, maintain the infrastructure or fix the faults when cables are dug up for the ADSL network.

        They have deployed infrastructure in the cheapest part of the network and the most expensive part of any network is the last mile.

  16. Who cares what they charge when i have been mailing and calling ISP’s for the last 8 years to get a simple ADSL connection only to be rejected every time due to pair gains or lack of ports on the dslam being the most common excuses.

    Will I ever see FTTH? I highly Doubt it and sadly this impacts on my business having higher expenses for wireless and satellite technologies that in my opinion just are not up to the task.

    So i say charge away in fact increase prices to be more expensive then wireless seeing as technically speaking your ripping off anyone who cannot get a wired connection above dial-up anyhow i mean $60 per month for 12 gig on one of my plans is just profiteering bullshit seeing as i need about 2-3 times this every month for work alone.

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