Welcome to NBN 17. It’s safer here.

73

opinion At the start of Valve’s seminal video game Half-Life 2, the mysterious man in a grey suit who appears sporadically throughout the series makes a salient observation to protagonist Gordon Freeman which applies perfectly to the current debate about the likely future of Labor’s flagship National Broadband Network project.

“The right man in the wrong place,” the G-Man comments sagely, “can make all the difference in the world.”

In Australia’s telecommunications industry, in April 2011, Internode managing director Simon Hackett is that man.

Last week, in front of the crème de la crème of the telco industry at the Communications Day Summit in Sydney, Hackett got up and argued in a landmark speech that it would be nigh-on impossible for small or even medium-sized internet service providers to sell services nationally under NBN Co’s current pricing model. The executive used flagrant language, describing the model as “insane” and warning that no small ISPs would survive their walk through the “valley of death” transition from the current copper network to the inevitable fibre future.

The future painted by Hackett during the speech was not a happy one.

As he explained the reasoning behind his attacks on NBN Co’s pricing model, a vision began to build in my mind of a world not unlike the dystopic future in which humble theoretical physicist Gordon Freeman finds himself in in Half-Life 2. I can just imagine Dr Wallace Breen’s Big Brother-esque face leering at me from my computer monitor in the future, every time I attempt to sign up for a new NBN-based broadband plan.

“Thank you for your application,” Dr Breen would say in reassuring, fatherly tones, in a voice not unlike that of Telstra chief executive David Thodey. “You have chosen, or we have chosen, one of the finest approved ISPs for you to receive broadband services from. I thought so much of your ISP, that I elected to run my office using its broadband services, which were so thoughtfully provided by NBN Co, through Telstra. I am proud to say I use this ISP. Welcome to your new ISP. Broadband is faster here.”

Of course, in the world of City 17, Dr Breen is not a benevolent force at all. Any shred of integrity he once may have had has vanished as he has placed his voice in the service of the Combine, an invading race of aliens who wish to pacify the Earth and use it for themselves.

Similarly, if Hackett’s predictions are correct, Australia may very well be facing a future where Labor’s dream of boosting the stilted competition in the national telco landscape is revealed to be nothing more than a fiction constantly mouthed by Communications Minister Stephen Conroy and other Labor cheerleaders … with the harsh reality dawning of a perennial choice between just five major national ISPs which you can choose to receive broadband services from – the current dominant five: Telstra, Optus, iiNet, TPG and Internode itself.

The reason for this, according to Hackett, is the cost of operating a national service on the NBN, which will require ISPs to interconnect with the fibre at some 120 points, instead of the vastly reduced number which he would favour.

But wait, it gets worse. Just as Dr Breen is just a front for his alien overlords in City 17, Hackett raised the possibility that any ISPs smaller than the top five who do want to continue to exist – or even, God forbid, start up new as new businesses – under the NBN, will be forced to deal with a much more nefarious force than NBN Co itself, the visible face of the project.

Yes, I speak of Telstra.

Although currently under the largely benevolent leadership of Thodey, Telstra has long been held by its rivals to be the great Satan of the telecommunications industry – the single dominant, former monopolist player which has a bottleneck grasp on the network reaching houses and business premises around Australia – as well as the lion’s share of retail customers on that network.

One of the principal aims of the NBN policy is to break down that control and create a new monopolist wholesaler – NBN Co – which would treat everyone fairly. But last week Hackett raised the notion – crazy though it might seem at first gasp – that the cost of selling a national service over the NBN will force any ISP smaller than the top five to continue to buy wholesale broadband services from – you guessed it – Telstra itself, or even Optus, which has already confirmed it will act as an NBN wholesaler.

The fact that the wholesalers will no doubt also add on a certain degree of margin to the services they buy from NBN Co and sell to smaller ISPs will add on another (price) barrier between any smaller ISPs who want to play in an NBN world and the top five.

This is simply a future which must not come to pass. To think that Australia could pass through five years of debate, countless industry pushes, hundreds of thousands of articles on the subject, innumerable political and telco infighting and a thousand other factors and come out the other end with Telstra and perhaps Optus still holding many of the sector’s prize cards close to their chest … would be heartbreaking, to say the least. We must not allow an industry structure where Telstra becomes the bottleneck wholesale provider mediating between NBN Co and small ISPs.

This is a model best described as ‘NBN 17’. A model which recreates so much of the bad old regime … in the guise of the new.

However, as the G-Man intimated about Gordon Freeman, there is still hope for the telecommunications sector. Right now, NBN Co’s senior management are sitting high up in their citadel in North Sydney, observing Hackett through their high-resolution cameras, while the Internode MD is slowly but surely making progress towards their headquarters, tearing their arguments asunder piece by piece along the way, like a bearded and implacable scientist applying a scalpel of truth.

Like the NBN project, there was a time when the power of the Combine and Dr Breen seemed unstoppable and everywhere. The project is moving forward. The masses are being brought to believe the grand vision. However, it has long been a trend in human society that when one, highly respected, influential member of the community takes a stand based on integrity and passion about an important issue, there is the potential for that individual to prevail.

Such is the situation in which Simon Hackett finds himself right now.

You would have to presume, given the fact that the Internode MD has been one of the most strident voices of criticism towards Telstra over the past decade, that Internode is a core target market for NBN Co. In Labor’s vision of the NBN, it is precisely mid-sized ISP like Internode that would be better able to compete with giants like Telstra, due to the removal of the need to provide services to customers through a network that belongs to a direct competitor (Telstra).

This is backed up by the fact, as Hackett pointed out in his speech, that NBN Co’s business case uses the example of an ISP of a similar size to Internode to demonstrate how its pricing plan would work.
And yet at the moment, it is Hackett – alongside other industry stalwarts like PIPE Networks founder Bevan Slattery and AAPT chief executive Paul Broad – who has emerged as one of the most strident critics of NBN Co’s model.

For these very reasons, NBN Co, the Australian Competition and Consumer Commission and even Communications Minister Stephen Conroy must listen to what Hackett is saying right now. It is not enough to cut deals with the likes of Telstra and Optus behind closed doors, slowly slide away from the NBN’s ‘wholesale-only’ mantra by setting up direct relationships with utilities, block out smaller ISPs from dealing with NBN Co directly through a flawed pricing model and allow the larger players to re-entrench their existing holdings in the new reality.

“I need to warn you in advance, there are a few actual numbers in these slides that might involve thinking about things,” Hackett told his audience. “They’re not just happy big marketing pictures. I apologise for that, I just don’t do marketing very well.”

Neither did Gordon Freeman. But then, he didn’t need to. For some people, mathematics and a crowbar are more than enough.

Image credit: Valve

73 COMMENTS

  1. I wasn’t aware that Telstra/Optus could become ‘wholesalers’ of the NBN, wasn’t that the idea of the NBN to be wholesalers to everyone?

      • There was never any intention of stopping this, and I actually think it’s a good thing for the market, and goes a long way towards addressing Simon Hackett’s concerns.

        By allowing Telstra, Optus or anyone else to become “WSPs”, the fears that small players wouldn’t be able to afford to do reasonable and competitive backhaul bandwidth deals are removed.

        Using Optus as an example, Optus can buy services from NBNCo, and then wholesale them on to wholesale customers in a Layer 3 form, much as was common a few years ago in the ASDL market – (Comindico springs immediately to mind).

        By leveraging off the spending power that an Optus has, the small players who could never hope to compete on a national level (simply through backhaul costs) have another way to get into that arena. Optus would of course put some markup on it, but since all NBN services are to be “declared” services, the ACCC has direct power to oversee such deals and intervene where necessary.

        But the option will ALWAYS be available to go direct to NBN for Layer 2 wholesale only, and everyone gets the same deal under the legislation just passed.

        All this was clarified – (and I was keen to make it clear) – this morning at the Wholesale Broadband Agreement workshop put on by NBN in Melbourne.

        • What Michael said! Thanks for the informative reply!

          Renai – whilst NBN Co will be ‘wholesale only’, they will only provide a portion of the wholesale services that go into providing a telco/broadband service. There are many other layers above that NBN Co will be providing. For example, whilst NBN Co will provide the optic fibre and the ‘data flow’, its the job of other companies to provide transmission, switching, and servers, and all sorts of things that direct the data to where it needs to go.

          In today’s world there are wholesale aggregators, and they provide a big role in the NBN world. I can see them providing an essential service even – providing switching and servers to those small RSPs that do not have the scale to afford the larger scaleinvestment.

          The whole point of the NBN is to take over the natural monopoly, bottleneck infrastructure, NOT to basically provide everything. The key thing is that NBN Co will be open-access, and not vertically integrated (in general), into these other services. This allows competition to flourish for these services.

          All this focus on Telstra being the only wholesale aggregator in the future – well it kinda misses the point that the NBN will allow other companies to compete with Telstra over time. And, as Michael points out, the ACCC has the power to declare Telstra’s wholesale service if it deems it should be regulated. And… it actually already is!

          • I can also see growth occurring in this market.

            The usual suspects – (Telstra, Optus, Pipe, Powertel, Verizon, AAPT, etc) – will be there, and other players – (such as the iiNets and Internodes of the world) – may consider entering the space.

          • Uh huh. So basically your say its going to be exactly what we have now just with different infrastructure.

            Great. No progress at all then. Glad you’re happy with that.

          • Umm, no, don’t believe I said that, and I don’t believe for a second that that’s true either.

            Wholesale aggregators right now are still ultimately at the mercy of Telstra, whoever they are – the important thing is that the industry as a whole is no longer beholden to them.

            Just as the “direct-to-NBN-layer-2” model will see a level playing field, an increase in the competition in the “wholesale-layer-3” market will see ISPs wanting/needing to follow that model have a more competitive market in which to negotiate those deals.

          • Even better, aggregators will still handoff to smaller RSPs at Layer 2, as they do now. Layer 2 Ethernet VLAN comes in dot1q trunk port from supplier, goes out on a dot1q trunk port to RSP.
            Layer 3 gets added on top by the RSP, that’s (one of) their added value in the chain.

    • It isn’t that new, the idea of a network aggregation providers, however NBN Co should be the provider of aggregation, not a middle man like Telstra or Optus.

      NBN Co’s pricing has always been a concern to me for this reason. It does not scale well for smaller providers. I think the pricing model is seriously flawed however trying to find a better one is a thought experiment that has proved tricky for me to balance as there are a lot of variables to consider.

      • The problem with the idea that NBN Co should provide aggregation is that wholesale aggregation isnt a natural monopoly, or bottleneck, service. As the NBN will be open access, and not vertically integrated into wholesale aggregation, it frees up competition for aggregation! Telstra will not be the only game in town for aggregation over time.

        • Perhaps, but inevitably, many expect that Telstra retains its spot as the main game. I regard this as an unacceptable outcome from the NBN policy.

          • @Renai LeMay

            “many expect that Telstra retains its spot as the main game. I regard this as an unacceptable outcome from the NBN policy.”

            Irrespective of whether Telstra is NBN Wholesaler or not Telstra (BigPond) will still be the main game in town, ISP’s going into the NBN with the biggest customer base will in all probability remain that way.
            BigPond has nearly half of all retail BB customers in Australia, it managed to do that when the value of its plans were poor, they are now clawing back lost customers by offering much better value.

            Unless BigPond does something really stupid like selling NBN plans at twice the price of other ISP’s it can only increase that customer base because of the power of the package, especially coupled with the dominate wireless product NextG/LTE and beyond.

            Renai if you find Telstra dominance in a NBN world unacceptable you need look elsewhere from the simplistic view about NBN wholesale resell which is nothing in the total view of market share because Telstra will not be the only player, you need to separate Telstra from its massive advertising budget, existing reatil customer base and the overwhelming success of NextG.

          • Remember elaine, Telstra kept prices artificially high (and kept technology from us – think ADSL2) because they could..

            But while their wholesalers (competitors) complained about Telstra being so expensive, they simply undercut them “marginally” and were fleecing us almost as much as Telstra. They actually loved Telstra’s high prices, because it allowed them to keep prices high and us the consumer paid!

            There is only ONE reason why plans are now MUCH cheaper, which you are too biased to admit…Guess what it is (clue – three letters, begins with N and ends with BN)?

        • No, nothing is wrong with aggregation providers on top of NBN Co in principle. The problem is, as Simon is trying to point out, is that the CVC costs are structured such that we have a limited number of national providers, which is contrary to what the NBN is trying to achieve, i.e. open the market.

          Meaning we will likely have increased cost to consumers simply because there is reduced competition in the sector, i.e. the same market problems we have now.

          • The bigger issue with costs is that they completely kill the concept of using fiber to its potential, that is its a massive detriment to downloading with fast speeds over fiber (i.e. contention)

            If you read through this thread (http://forums.whirlpool.net.au/forum-replies.cfm?t=1671279), for a business, a 1gbit service can cost ~$90000 in CVC costs, which is multiple factors higher then any other fiber provider in such areas.

            There is not going to be any freaking point in small business using the NBN (and assuming they use the NBN to its potential, that is 100mbit or greater speeds) with such charges.

            There is nothing you can however do about the pricing, NBNCo needs the CVC costs to pay off the NBN. They could do a reshuffle of funds, but then that would mean the light and/or medium users will suffer. Either way, someone will have to suffer. And if this goes over, it will be MUCH MUCH MUCH MUCH MUCH worse then Telstra, because its going to be a legislated mandated monopoly

          • Presuming even for a moment that you understand how the CVC pricing and dimensioning works – (which you’ve demonstrated repeatedly you do not) – you’ve also just failed basic maths.

            At $20 per Mbit, multiplied by 1000 Mbit, how you get “$90,000” is completely beyond me. That actually totals “$20,000”.

            Now since that’s $20/Mbit per month, and there’s 2,592,000 seconds in a month, you’re only charged that “$20,000” rate for each and every second that your 1000Mbps is maxed out.

            ie: 0.00771604938271604938271604938272 cents per second, if it’s maxed out. Most of the time, the connection sits idle.

            Nobody is going to be charged $20,000 for a 1000Mbps, let alone $90,000.

          • From
            http://forums.whirlpool.net.au/forum-replies.cfm?t=1671279&p=6#r114

            Because of the $20/Mb CVC charge PLUS a further $20/Mb if the RSP wants QoS, the wholesale cost of a dedicated point to point circuit is:

            Port – CVC + QoS – RSP Network – CVC + QoS – Port

            which comes in at roughly $9,000 inc gst.

            If the customer needs a gigabit the cost is $90,000 inc gst.

            These are PER MONTH costs. So a point to point gigabit Ethernet service for an enterprise customer like a bank is going to cost a million dollars per year.

            Do you have any idea how much fibre I can build for a million dollars per year?

            Do you realise that we sell that exact service to corporate and even SME customers for one tenth that price today?

            The NBN will completely fail to deliver larger businesses useful services which means they will continue to cluster around other carrier’s fibre.

          • If the connection is maxed out 100% of the time.

            And if this is really true, why has only one ISP “figured this out”? Wouldn’t they all be jumping up and down?

          • Plenty of ISP’s have claimed that NBNCo’s CVC charges make it non profitable for high contention downloading (i.e. unlimited downloads, gets higher at worse speeds, streaming of services)

            For example, netflix just stated that their service will cost another $66 a month for basic video streaming, making their business unprofitable
            http://www.adelaidenow.com.au/news/south-australia/broadband-users-face-price-hike-for-video-services/story-e6frea83-1226033462459

            Whatever way you want to twist it Michael, you are WRONG. If you want to actually use any of the benefits of fiber (fast speeds with high downloads), you will be PENALIZED

          • This is your original question

            And if this is really true, why has only one ISP “figured this out”? Wouldn’t they all be jumping up and down?
            from http://delimiter.com.au/2011/04/07/welcome-to-nbn-17-it%e2%80%99s-safer-here/#comment-57269

            and not

            Who else has claimed it’s gonna cost $90,000?
            http://delimiter.com.au/2011/04/07/welcome-to-nbn-17-it%e2%80%99s-safer-here/#comment-57277

            Stop moving the goalposts please, its a nice tactic to make yourself look good but its also a logical fallacy in debate ;)
            http://en.wikipedia.org/wiki/Moving_the_goalposts

            I responded to your original question, ergo ISP’s figuring this out

          • Speaking of fools and everyone knowing it… “dat ego”

            Tell us again how the SENATE FORMS GOVERNMENT… remember YOU said that…LOL!!!!!!!

            That one from you proved without doubt, that anything anyone else may say which is incorrect (not saying anyone else here is) is of no consequence, as even a child would know what you DID NOT…

            Then you had the audacity to argue and argue (with about 6 posters, who you were inferring fools…LOL) that the Senate formed government and when you Googled, LOL… to find you were wrong…you did your old trick and tried to turn it all around…OMG…

            WELL SAY SOMETHING, INSTEAD OF SPINELESSLY HIDING AS YOU DO EVERY TIME I ASK (and I do enjoy asking…LOL) INSTEAD OF POINTING THE FINGER AT OTHERS…!

          • Further, since you are are referring to small businesses:

            “…There is not going to be any freaking point in small business using the NBN (and assuming they use the NBN to its potential, that is 100mbit or greater speeds) with such charges…”

            Even if it really was that high, exactly how many “small businesses” are going to be ordering point-to-point 1Gbps second services?

          • Its ridiculously expensive for a 100mbit service as well.

            I think you are missing the blatantly obvious, as stated by John Lindsay, there is no charge on contention (or if it is, its incredibly small or negligible). You basically get delivered a service to the limit of how much data goes down the pipe

            But yes, continue in denial. Deny, deny! Everyone is wrong apart from you Michael!!

          • Honestly, you are genuinely hilarious sometimes.

            Unlike yourself, I at least have the courage to stand in an open forum, on the record, and not hide behind a moniker. I never claim that I am right or wrong – I state my opinion and understanding, based on 16 years of experience in this industry, and interaction and discussion I’ve had personally with NBNCo, and in forum with them, almost from day one – including another event yesterday, which further enforced my understanding of the pricing model.

            I have no vested or financial interest in any telecommunications company. I have no vested or financial interest in any political party. I have no vested or financial interest in NBNCo.

            I do have a vested and financial interest in the future of this country, and understand the long term value of this project for Australia.

            You have a different view, and that is your right. You and your other “buddies” around here are the antagonistic posters around here…it’s called trolling. Since you constantly accuse me of it, you must know what it means?

            If this really is the pricing model, I’ve never heard Malcolm Turnbull mention it in parliament in debate. Or even Senators McDonald, Fisher, or Birmingham – the staunchest opponents of the NBN in the parliament. Surely if it had any substance AT ALL, they would have brought it up. I’m sure Turnbull in particular is well aware of these aspects of the debate.

            I’m not sure where Internode has derived their concerns – that’s a matter for them. They should be beating down the door of every media outlet that they possibly can to get this out there. Even the ultra-right-wing, super-anti-NBN newspaper The Australian isn’t going with this one.

            Time will be the judge here – not me, and certainly not you.

            The biggest difference between you and me is that I’m not worried.

          • Unlike yourself, I at least have the courage to stand in an open forum, on the record, and not hide behind a moniker. I never claim that I am right or wrong – I state my opinion and understanding, based on 16 years of experience in this industry, and interaction and discussion I’ve had personally with NBNCo, and in forum with them, almost from day one – including another event yesterday, which further enforced my understanding of the pricing model.
            waffle waffle waffle waffle

            But yes, you have the courage, and probably now the stupidity, to stand open in a forum, because everyone know knows what a fool you are

            Also I would recommend you start going to forums apart from NBNCo’s, your not going to get an objective view on anything if you just constantly go to the same company that is selling you the product (i.e. NBN)

            I have no vested or financial interest in any telecommunications company. I have no vested or financial interest in any political party. I have no vested or financial interest in NBNCo.
            Good to know

            You have a different view, and that is your right. You and your other “buddies” around here are the antagonistic posters around here…it’s called trolling. Since you constantly accuse me of it, you must know what it means?
            Hey, what a second! You were the one that admitted to trolling, because you were having fun

            If this really is the pricing model, I’ve never heard Malcolm Turnbull mention it in parliament in debate. Or even Senators McDonald, Fisher, or Birmingham – the staunchest opponents of the NBN in the parliament. Surely if it had any substance AT ALL, they would have brought it up. I’m sure Turnbull in particular is well aware of these aspects of the debate.
            Yeap, we have the ISP’s to bring forward the prices due to CVC, since they understand the modelling (unlike you, and the politicians). The next question time regarding the NBN, with these figures being released, will be interesting ;)

            I’m not sure where Internode has derived their concerns – that’s a matter for them. They should be beating down the door of every media outlet that they possibly can to get this out there. Even the ultra-right-wing, super-anti-NBN newspaper The Australian isn’t going with this one.
            They have, commsday, their own media releases, even publications here (http://web.me.com/johnslindsay/John_Lindsay/Presentations.html). The Australian has picked up these things

            It helps if you take the wool off your eyes (such as reading stuff from the same site/source all the time)

            The biggest difference between you and me is that I’m not worried.
            Sure thing, if it helps you sleep at night

          • 10 PRINT “DETEEGO SAYS NBN IS BAD!”
            20 GOTO 10

            And this is’t trolling how?

            Don’t worry Michael, I sympathize with you, I would be quite scared if I was in your position ;)

          • Wow a new exit strategy MW when gets to hot in the kitchen, what happened to *facepalm*?

          • So the justification used all along for building the NBN and not bothering with a cost-benefit analysis was:
            “Use your imagination! Who knows what applications will come along once we have fibre everywhere!”

            Now the justification for it being too expensive to actually order high bandwidth services is, in Michael’s very own words:
            “exactly how many “small businesses” are going to be ordering point-to-point 1Gbps second services?”

            Am I missing something here?

          • You’re missing the fact that today’s pricing reflects today’s usage. Tomorrow’s pricing will reflect tomorrow’s usage.

          • And you’re missing the fact that a monopoly has zero, nada, zilch incentive to bring down prices “tomorrow”, especially when it has tens(44?) of billions of dollars worth of Government bonds to pay back, with interest.

          • Yes, you’re missing something.

            What is being overlooked is that it is enshrined in the NBN legislation that anyone can compete with the NBN on point to point services.

            It’s great that internode are advocating for reduced pricing on cvc, but a point to point example won’t move the accc or the nbnco because they’re not really in that market except as a provider of last resort if the pricing is correct (and I have no reason to believe it isn’t).

            So the arguments should be about the average business connection and contention not point to point, since Internode could lay their own fibre to provide point to point which they’ve just demonstrated there is possibly a business case to do that.

            Oh and the accc will be able to regulate NBN pricing if it feels Internode has a strong case, or if it is demonstrated that the actual retail pricing turns out higher than it should be or detrimental to competition. The difference between what happens now and the nbn is that the regulator has a much clearer picture of the costs vs what Telstra has historically told them, but it still makes zero difference to point to point which is an open market.

          • CVC is provisioned and charged as it is ordered by the RSP.
            If the RSP orders 1000Mbps of CVC at POI number 119, for example, then you are charged $20 per Mbps per for 1000Meg, which equals $20,000 EX GST per month.
            This is how all carrier interconnects for Layer 2 products work. There is no usage based calculations done.
            Some carriers do 95th percentile billing for IP transit, but not for Layer 2 aggregation.

          • Yeah, but you spread that $20,000 across all of your users accessing via POI 119.

            If you have 4000 users behind that POI, that’s $5.00 each.

          • Hi Michael,

            Back up buddy. The original post was regarding a 1Gbps BUSINESS connection.

            With your 16 years experience, you should know that you don’t contend business grade services at the same rate as residential grade services.

            It might not be 1:1 (Optus ZedX is 12:1, and that’s their highest contended business grade service), but there is no way on this earth that you could sell a 4000:1 contended service as business grade!!!

          • More FUDged figures “dat ego”…?

            Don’t you ever learn?

            Or do you just have no ethics/decency/honesty what-so-ever?

  2. It’s no surprise that Simon Hackett holds a MathScience degree from a respectable university.

  3. I remember a time when Mr Conroy, in all his foolhardy, zealous glory, proclaimed that if the NBN Co. couldn’t come to terms with Telstra then they would carry on without them.

    What a sad state we’re now in to see some of the fundamental NBN propositions actually being compromised to placate Telstra, of all people.

    • “What a sad state we’re now in to see some of the fundamental NBN propositions actually being compromised to placate Telstra, of all people.”

      What particular fundamental NBN proposition is being compromised to placate Telstra?

  4. I found it interesting that Optus has announced it will provide wholesale access to virtual isps too. Strange they waited until after the ACCC decision where they supported the “heaps of pois” model. :)

    I Also think it is very foolish of NBN to ignore Simon’s concerns, he has the rare gift forge being able to.see.past biscuit own business impacts and can provide an important advocacy for end users without the intimate industry knowledge.

  5. Half Life references are very very clever.

    The future of NBN is scary though.

    One the the main NBN selling points for me it being availible for all and the lack of a major telco having a monopoly on the infrastructure, thus avoiding the Telstra difficulties when getting broadband now.

    If it is Telstra operated etc. we are just recreating the current issue.

    My fear is Conroy doesn’t listen (or rarely does) and will be stuck on his path until it’s threatening to his percieved interests.

    Great post, as always.

    • @millionsofmyles

      “One the the main NBN selling points for me it being availible for all and the lack of a major telco having a monopoly on the infrastructure, thus avoiding the Telstra difficulties when getting broadband now.

      If it is Telstra operated etc. we are just recreating the current issue.”

      It is not Telstra operated, it is Optus operated at the moment, Telstra has not even officially announced anything about reselling NBN wholesale.

      When you refer to a ‘monopoly on infrastructure’ you don’t actually mind the NBN Co being that monopoly I take it?

      Nothing like a total disregard for the facts tainted with a healthy dose of hypocrisy eh?

  6. I don’t have much more to add to the above comments which I agree with. Just wanted to say great comparison to City 17 and a great article. ;)

  7. *meh* if you want lots of isps then you’ll have to hope the coalition stops the nbn rollout, and lets everyone hang on to their profit margins. Whether you have cvc/poi or not, the retail market will be over for most players until the accc steps in and decides what should be the minimum level of competition.

    How many retail only isp’s will survive a milk and petrol style price war?

  8. Be prepared to get your internet like you get your banking… but meh im a share holder so all that customer gouging is good for my dividends…

  9. Great article. Hilarious actually. Pretty long bow to link this to HL2 lol, but full credit. I love it. I especially liked the way you introduced Telstra:

    […] will be forced to deal with a much more nefarious force than NBN Co itself, the visible face of the project.

    Yes, I speak of Telstra[…]

    Tish Boom. Priceless.

    • “…] will be forced to deal with a much more nefarious force than NBN Co itself, the visible face of the project.
      Yes, I speak of Telstra[…]”

      It’s funny how everyone wants to paint Telstra as the ogre in all of this when Optus is the only company that has so far made a official announcement that it will be a NBN wholesale reseller.

      But of course it doesn’t make quite as good copy when you are out to Telstra bash by referring to Opus the CVC monopoly, or stating its unacceptable that Optus retains its dominant position etc etc.

      Also I thought the structural separation of Telstra that everyone has been baying for will fix it all of this up?

      Of course everyone knows the structural separation of Telstra will not make one ounce of difference to Telstra market share in the new NBN world or even the current one, but let’s pretend as if it will.

      Smoke and mirrors always dominates the communications scene in Australia

      • Market share profit margins, and the NBN aims to remove the ability of Telstra to maintain 60% gouging margins on fixed line services, not take away their market share. Limits on market share are determined by accc.

        If you think Telstra can maintain 60% profit margins and that nothing will change on the NBN then you should buy Telstra shares, as they are ridiculously undervalued if your argument is correct.

        That kind of insight can make you very rich! Go for it!

        • @Brett Haydon

          “Market share profit margins, and the NBN aims to remove the ability of Telstra to maintain 60% gouging margins on fixed line services”

          The pricing and access control of the Telstra last mile has been under the legislative jurisdiction of the ACCC for the last 14 years, if you feel the pricing of ULL, LSS, PSTN line rental and exchange access was too high you need to make a submission to the ACCC like many ISP’s have done successfully in the past.

          “Limits on market share are determined by accc.”

          Really? it has not stopped the likes of BigPond, Optus and iiNet increasing market share, iiNet has recently purchased the ISP’s Westnet, Netspace and AAPT – the ACCC said what to those takeovers?

          The top two ISP’s BigPond and Optus hold well over 50% of the retail market, the ACCC has curtailed this how?

          “If you think Telstra can maintain 60% profit margins”

          What 60% profit margins on what product/s are you referring to here that Telstra are ‘maintaining’?

          • That’s fine, perhaps you can point to me the regulations granting access to fibre rollouts. And while you’re at it you can copy the link to residents in South Brisbane and their ISPs getting disconnected from copper and migrated to Telstra wholesale/retail.

            And once you’ve found that link you can provide the one which says ISP’s are stoked with how the accc regulation of wholesale prices are working out for them so far.

            I don’t know what the individual product margins are, but it’s a matter of public record that the overall Telstra gross margin is > 60%, and so I trust the business analyst estimates of 60% on fixed phone + broadband from reading the accounts.

            I don’t know what the accc ‘limit’ is but don’t see how iinet buying out isps makes it harder to compete with Telstra.

          • Sorry I am not sure what the link is between what we were discussing and this at all?

            http://delimiter.com.au/2011/04/08/telstra-details-south-brisbane-fibre-upgrade/

            “one which says ISP’s are stoked with how the accc regulation of wholesale prices are working out for them so far.”

            I don’t care if they are stoked or not, it certainly doesn’t stop them selling TW product, the ACCC sets the prices on monopoly infrastructure, if ISP’s have a problem with that they make a submission and plead their case to the independent arbitrator.

            ” and so I trust the business analyst estimates of 60% on fixed phone + broadband from reading the accounts.”

            Well assuming its right for the purposes of your point, what is the ACCC supposed to do about the retail margins a business makes on a product anyway?

            “I don’t know what the accc ‘limit’ is but don’t see how iinet buying out isps makes it harder to compete with Telstra.”

            Well yes it helps iiNet in putting it at the No 3 ISP in Australia but how does that help the end user choosing a ISP when the most of the plans from the takeover ISP’s are now virtually identical to the parent company iiNet?

          • LOL… elaine.

            2 different correspondences and the same response from you…

            “you aren’t sure of the link or what that has to do with the discussion”…

            Why don’t you just say you aren’t sure… because we already know you aren’t sure.

            In fact….!!!!!

          • *And once you’ve found that link you can provide the one which says ISP’s are stoked with how the accc regulation of wholesale prices are working out for them so far.*

            stoked? they should be – at current ULL prices, they’re accessing the CAN for a song.

            *I don’t know what the individual product margins are, but it’s a matter of public record that the overall Telstra gross margin is > 60%, and so I trust the business analyst estimates of 60% on fixed phone + broadband from reading the accounts.*

            those “60% margins” you’re quoting are EBITDA margins, i.e. before taking into account “depreciation and amortisation”.

            for a business operating with little physical capital (e.g. advertising firm, lemonade stand, etc), EBITDA margins would be reasonably reflective of profitability.

            however, for a telco, which is essentially leasing services on its communications network, you have to take into account the massive depreciation and amortisation charges that are incurred in operating such a capital-intensive business.

            ongoing operating expenses in the form of maintenance costs are trivial compared to the “capital charges” involved in building and operating a fixed network. this is especially the case for a brand new 93% FTTP fibre network – which is why arguments about how a fibre network is so much cheaper to maintain are irrelevant when you consider the massive capital charges arising from sinking in tens of billions of dollars of fresh capital into a new network.

    • And at the same time as the NBN expected build cost blows out to $44billion, $400 Million is being slashed from the annual medical research funding…If this were Survivor, I think Julia would be heading to Redemption Island for a duel with KRudd.
      Not sure why the Government refused to listen to established players like Pipe (what the heck would they know about costs for running fibre?!?!) when they told them that there is no way fibre can be run at the same costs as Telstra maintenance contracts, which is what they seem to have benchmarked their expected costs to.

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