opinion/analysis If the Coalition orders NBN Co to pursue a heterogenuous National Broadband Network rollout which features different rollout styles from Fibre to the Premises, to the Node and to the Basement, the company will face a fundamentally new challenge: How to fairly set wholesale prices on technologies which are fundamentally different?
If you believe Communications Minister Malcolm Turnbull (which we’re not sure we do, given the Member for Wentworth’s hypocritical recent history of doing other than he says when it comes to setting the NBN agenda), the new Coalition Government is open to any possible technological model when it comes to rolling out the NBN — everything from Fibre to the Premises, to the Node, to the Basement, satellite, fixed wireless, and everything in between.
“I am – and the government is – thoroughly open minded, we are not dogmatic about technology,” Turnbull said in a press conference in late September announcing interim steps for NBN Co. “Technology is not an ideological issue, we are completely agnostic about it. What we want to do is get the best result for taxpayers and consumers as soon as possible.”
What this statement means, in effect, is that the Coalition is not wedded to the previous Labor Government’s uniform vision for the NBN.
Under Labor, the NBN was to have been constructed through just one primary technology — Fibre to the Premises — with a minority of premises in very remote regions around Australia served with more economical fixed wireless and satellite services.
The simplicity of this model has always been its strength. Labor’s vision can be boiled down to the simple vision of using the best available technology — Fibre to the Premises — for the vast majority of Australian premises, in an effort to deliver them high-quality, superfast broadband through infrastructure which will likely be around for the next 50 to 100 years. In areas where the cost becomes extreme on a per premises basis, subsidiary technologies will help plug the gaps.
The simplicity of this model has had several direct consequences for the way that NBN Co has priced its wholesale services to retail ISPs.
Firstly, it has allowed NBN Co to set wholesale prices that are largely consistent for most Australians. If you’re in a NBN fibre zone, you’ll be paying the same price, no matter whether you live in Gosford or Gilgandra, Sydney or the Sunshine Coast.
Secondly, the versatility of the FTTP model has allowed NBN Co to arbitrarily set certain tiers of wholesale pricing based around speed, that are largely equivalent to the prices of similar plans on its satellite and fixed wireless prices.
You can see this playing out in the way retail ISPs have been pricing their different types of NBN services. For example, iiNet currently charges customers $64.95 per month for a 25Mbps NBN FTTP service with 200GB of quota. It charges the same for a 25Mbps plan with 200GB of data using NBN Co’s fixed wireless service. And although satellite pricing is an outlier at the moment because NBN Co does not yet have its own satellite infrastructure, we’re sure that the plan was eventually to somewhat harmonise satellite prices at its top 25Mbps speeds as well.
What we see here is the illusion of price cohesion. Even though FTTP, wireless and satellite are fundamentally different technologies, and don’t behave at all the same on any measure, NBN Co has been able to price them at similar wholesale price points at certain gross speed tiers.
The problem for NBN Co and the Coalition is that if NBN Co pursues a heterogenuous technology model for the NBN, this pricing schema will necessarily become significantly more complicated.
To understand what I’m talking about here, let’s take the most likely case.
As at the beginning of October, NBN Co had completed construction of its Fibre to the Premiises network to around 290,000 premises. In addition, in late September Turnbull stated that FTTP construction would be completed in areas containing 300,000 premises where construction contracts had been signed and NBN Co had issued work orders to its rollout partners. Furthermore, detailed network design had already been undertaken in a further 645,000 premises, meaning some of those premises might end up receiving FTTP services.
Although it is likely to maintain most of the satellite and fixed wireless portions of its rollout, it is likely, as per the NBN policy it took to the election, that the Coalition will switch the majority of the NBN rollout to a Fibre to the Node rollout style.
In addition, the Coalition is also canvassing an alternative, ‘Fibre to the Basement’ style of NBN rollout for some areas of the NBN in built-up metropolitan zones, where many commentators have stated it makes more sense to deploy fibre to the basement of apartment buildings or shopping centres, for example, and use existing in-building copper networks to make up the rest of the rollout to actual individual premises.
What this will mean in practice, will be that a future NBN Co will likely need to offer at least five different types of wholesale prices, to match five different types of network deployment.
Of course, it’s theoretically possible that the company could continue to artificially match speed tiers to certain price levels, as it appears to have been doing with its fixed wireless and FTTP offerings at the 25MBps level.
For example, NBN Co could theoretically set uniform or close to uniform prices for the 25Mbps speed tier, which will be universal across satellite, wireless, FttN, FttB and FttP platforms. Satellite and wireless services could then drop off, as they are not capable of speeds higher than 25Mbps, but NBN Co could then theoretically set consistent prices across the FttX family of technologies, ranging up to 100Mbps, which is the theoretical maximum speed offered under FttN and FttB. And I’m sure NBN Co will doubtless make some attempt to generate wholesale and retail price cohesion in this manner.
However, this is going to be a very difficult argument for the company to make to its retail ISPs and to end user customers.
After all, most Australians are aware that under Labor’s plan, metropolitan NBN customers will be subsidising rural users. Setting satellite and wireless wholesale prices close to the lower tier of FttP is not a financial choice; it’s a policy decision, to ensure rural Australians don’t pay prices exorbitantly larger than those in the cities.
However, it would be an entirely different situation if NBN Co started charging the same prices for services delivered in the same street which would be, separately, getting access to FttN, FttB and FttP services.
And this is far from being a remote example. Under the current NBN rollout, everyone in metropolitan Australia would have received the same FttP service, at the same price. However, under the Coalition’s plans, it is extremely likely that many houses in many streets, for example, would have FttP rolled to their door, while their neighbours in flats would receive FttB, and the next street might only receive FttN.
Sure, NBN Co could charge relatively consistent prices for these FttX services at, say, 50Mbps, 75Mbps and then 100Mbps. However, there’s a very serious question about whether it would be ethical to do so.
After all, even if all three platforms were able to deliver stable services at each speed tier, for example (and this is far from a sure thing, given the variability of Telstra’s copper and the distance of each premise from the nearby telephone exchange), the upload speeds available would vary significantly between the three technologies, as would the latency and reliability.
FttN is a significantly less technically capable rollout style than FttB or FttP, and offers significantly reduced services. And while FttB is expected to be more reliable than FttN, the quality of the service it delivers pales in comparison to FttP in pretty much every respect.
Now, let’s get a bit more detailed in our analysis of the situation.
NBN Co currently charges wholesale rates for services on its network in two ways. Firstly, it charges what it calls its Access Virtual Circuit, or AVC. This is the monthly per end user charge which NBN Co charges ISPs to access its network, and it scales up on the basis of speed (for example, you pay more for a 100Mbps link than you do a 12Mbps link). And secondly, the company charges what it calls its Connectivity Virtual Circuit, which refers to the sees ISPs charged for reserving specific bandwidth from the local Point of Interconnect to the end users’ premises. This scales up as ISPs use more overall data.
It’s likely, in a differentiated FttX world, that NBN Co would keep its CVC costs the same for pretty much all of its services (with the possible exception of its satellite platform). However, it’s likely that the company would find it necessary to differentiate its AVC costs depending on what actual variety of fibre users were consuming.
So, for example, NBN Co might $35 per month for a FttP service at 50Mbps, which is around its current price today (PDF). However, it might then charge $32 for that same speed as a FttB service, and $30 for that same speed as a FttN service.
This is the kind of system it is extremely likely that a regulator such as the Australian Competition and Consumer Commission would force NBN Co to adopt; because if the company did not, then it would be charging the same price for different grades of broadband service; something it’s hard to see the ACCC letting any wholesale telco, let alone a government business enterprise, get away with.
If this kind of system is adopted by NBN Co in a differentiated FttX world, it then forces retail ISPs into various choice, most of them unsavoury.
You can imagine a company like TPG or Dodo simply ignoring the differentiated prices and setting one uniform price at a certain level, to stop confusion on the part of consumers. Such companies could probably get away with this, however unethical this would be, by laying out in complex terms and conditions documents how they would attempt to get the best grade of NBN service possible for that price.
This model would probably be great for FttP end users, who would be paying the same price as everyone else for a vastly superior service. However, it would probably disadvantage those on FttN or FttB.
Other, more transparent companies such as iiNet would probably start selling different broadband plans depending on what particular variety of FttX was connected to their premises. So, for example, you might be able to buy a 200GB FttN service for $59.95, or if you lived in an apartment and could only get FttB, the same 200GB plan for $64,95, or $69.95 if you were lucky enough to get FttP.
The problem is that this would result in a massive number of broadband plans. ISPs like iiNet already have relatively complex NBN pricing structures, with a handful of speed and download quota points, plus add-ons such as IP telephony, meaning customers are often already bamboozled by the variety. The options would essentially be tripled in a differentiated FttX world.
Underlying all of this is the concept of “fairness”.
Right now, there are only so many types of broadband that Australians can buy. Usually, most residents buy ADSL because that’s all they have available to them. Some, usually those in metro areas who own their own house, have a choice of HFC cable that they can add to the mix. And for those who can’t get either, there are mobile broadband or even satellite options.
If NBN Co pursues a differentiated FttX strategy, it’s going to create a patchwork of broadband options all over Australia, with Australians unable to determine what type of broadband services they will be able to get access to, at which price points, until they actually move into a premise. Premise by premise will be different and ISP prices will be substantially different from each other. And let’s not forget that the Coalition also wants to keep HFC broadband alive, adding to this complex mix.
A future predictor of this degree of complexity can be found in the revelation by retail ISP TPG last month that it would be deploying its own FttB network in some metro areas, offering 100Mbps plans with unlimited data quota for just $69.99 a month.
Although NBN Co will very likely be planning to deploy FttB to exactly the same locations which TPG will, it’s very hard to imagine any retail ISP on the NBN being able to match those prices, because TPG has an inherent advantage in terms of owning the fibre all the way to the apartment blocks its targeting. It doesn’t have to pay a wholesaler such as NBN Co for access, and so will be able to offer much better prices in the same locations than NBN-dependent ISPs such as iiNet will be able to.
Customers in those areas will be asking: “How can TPG charge radically different prices than NBN Co?” And NBN Co will be forced to either abandon those areas to TPG, leaving the ACCC to force TPG to open up its networks to wholesale competitors, or cut its wholesale prices in those areas and compete, further changing its product model for certain geographies. Retail ISPs such as iiNet will need to offer different pricing again — for certain suburbs.
The whole thing is starting to sound like chaos.
Now, all in all, it’s not easy to say that this is all a bad thing. After all, what Australia should end up with in the long-term under a differentiated FttX model is a much more market-dependent model, and markets are inherently often chaotic when there are different products on offer. It’s not always bad, just confusing. The Coalition’s model should be quicker to deploy than Labor’s all-FttP plan, and this means that almost everyone will receive acceptable levels of fast broadband faster than many would have under Labor. In addition, in the long-term, all fixed broadband networks will also trend towards fibre. FttN and FttB will eventually become FttP in many, perhaps most, areas, and prices will eventually harmonise to a large degree.
However, I also hope this article has done much to forewarn Australians that the broadband future they are likely going to see under the Coalition will be messy. It will be chaotic, inelegant, and it will be seen as being unfair. That’s what happens when you take a position of technological neutrality. You miss out on the chance to pick the best technology — once and for all.
This is a somewhat similar angle to the op-ed piece I wrote over 12 months ago over at iTNews:
http://www.itnews.com.au/News/302835,what-is-a-halted-nbn-worth.aspx
The financials of the 93%/4%/3% split were designed to make sure that everyone paid the same wholesale price regardless of technology or location. Malcolm may create a very difficult rod to bear for his back if he lop-sides it too much and causes wholesale pricing for some locations to become prohibitively expensive.
@Micheal Wyres
‘ Malcolm may create a very difficult rod to bear for his back if he lop-sides it too much and causes wholesale pricing for some locations to become prohibitively expensive.’
It is not up to Malcom to lop side pricing one way or the other, it is up to the ACCC.
I wonder therefore why you would assume that all of sudden under a Coalition government the ACCC will allow some locations ‘to become prohibitively expensive’ under a blanket NBN Co pricing model which would cover all infrastructure types wholesaled by the NBN Co and accessed by RSP’s.
Alain^M^M^M^M^MFibroid,
You should really read more carefully – where did I say that Malcolm *sets* the price?
I said he may “cause[s] wholesale pricing for some locations to become prohibitively expensive”, not that he (or anyone else for that matter) actually *SETS* the price. Changing the technology mix WILL alter the basis of the pricing model.
The satellite and wireless networks are ridiculously priced as standalone networks. Changing the model for the remaining 93% will make it harder to fund that 7% of the network.
I’m not talking about RSP pricing – I’m talking about how NBN Co makes a dollar itself, and recovers the investment.
It’s pretty simple, really.
It’s quite simple that the ACCC sets the pricing on monopoly infrastructure as well, irrespective if that NBN Co infrastructure is FTTP and FTTN, and until Telstra does not hold the dominance on monopoly exchange based infrastructure it will continue to set pricing on that as well.
I don’t envisage any areas being allowed to become ‘prohibitively expensive’.
Err, why did you argue that FttP was bad because it was a monopoly, but now embrace a FttN monopoly?
Well, I think you know the answer to that. That’s what his team told him he should believe. Consistency and rationality are irrelevant.
I think Renai’s hit it on the head with one of the summaries towards the bottom – with a mix of technologies, at the end of the day those with the best connection will get the better value for money because the ISP’s wont be splitting hairs with their packages.
I can see the point being made. At a wholesale level, its ridiculous to expect NBN Co to charge the ISP’s the same for different technologies, so ACCC will step in to address that. The counter argument will be the packages to the end user drive the speed being used, but thats a retail issue, not a wholesale issue.
I figure it as the difference between buying a high performance car versus a hatchback. Its unfair to charge the same price for both of them just because the high performance car can only do the speed limit as well.
So iiNet charges me $69.95 a month for a 50/20 FttH connection, and Ned up in Newcastle gets hit with the same cost for his 50/4 FttN connection. Or whatever ratio the FttN network delivers.
The end user isnt really going to notice though, because its a pricing structure for the same download speed for them. The issue will be hidden away and argued about behind closed doors as a result.
> I think Renai’s hit it on the head with one of the summaries towards the bottom – with a mix of technologies, at the end of the day those with the best connection will get the better value for money because the ISP’s wont be splitting hairs with their packages.
Competition will make this difficult if NBNCo’s charges are different. For example many RSPs charge different fees for ADSL on their own infrastructure, Naked ADSL and resold Telstra ADSL.
Yeah, fair points. It still gets messy though whether you’re on FttH or FttN though. FttH will have the default NTU which most people will think is their router as well. Side note: do you only need a router with the FttH NTU, or do you still need a modem?
I can see the argument about there being eleventy three different costings, but the ISP’s arent going to want to deal with that sort of confusion, and its not beneficial to shove that onto the consumer either, so how it plays out is going to be interesting. Do they simply up their profit margins on the lower costing CVC’s so they’re all the same, or do they mix and match depending on tech level available?
I don’t know what the problem is, ISP’s today sell ADSL2+ both their own DSLAM’s plans and Telstra Wholesale based plans, they sell Naked DSL plans from their own DSLAM’s using Telstra ULL, Telstra and Optus sell HFC plans plus you have NBN Co FTTP.
So maybe in the future they have three infrastructure types to sell, FTTN, FTTP and HFC from most likely one wholesaler the Government owned NBN Co and add to this wireless from one of the three suppliers (like now) and all of sudden it all gets too hard and confusing?
So we are forced to use the monopoly NBN here too…
The one you screamed, socialist monopoly when the ‘dreaded others’ were in power…?
But it’s ok now…?
What a strange, twisted set of one eyed rules the node nerds live by.
“ISP’s today sell ADSL2+ both their own DSLAM’s plans and Telstra Wholesale based plans, they sell Naked DSL plans from their own DSLAM’s using Telstra ULL, Telstra and Optus sell HFC plans plus you have NBN Co FTTP.”
Yes, and they have different pricing for each. Most ISPs will offer a price for connectivity on their own infrastructure, and another price for a service on Telstra’s.
The intent of NBN was to offer customers ultra-fast broadband at a common price. If your underlying input costs are significantly different, then this becomes difficult to achieve.
Still – it’s no different to the provision of electricity. Metropolitan users in Perth pay the exact same cost as regional users in Karratha, with their service delivered over significantly different infrastructure. The service in Karratha is many times more expensive to provide, and so we all share the cost of that.
NBN is already cross-subsidised to an extent – with expensive satellites used to provide a service to a very small minority.
Depending on what side of the fence you sit on, cross-subsidisation can be a fantastic or a horrible thing.
Your missing the point I was making Fibroid. 3 technologies you mention, FttH, FttN, and HFC. All have different capabilities, and the point of the article is that because they are different, the CVC shouldnt be the same across all 3.
As a consumer, is it fair that a 50 Mbps HFC plan costs the same to the consumer (eg $70/month) as 50 Mbps on FttH if there is a small but identifiable difference in the wholesale cost to the ISP? Someone’s getting ripped off by some small but identifiable amount, and that someone is the consumer whos technology is costing the lower CVC.
The difference here is that because there are multiple technologies that can provide the same improved speed, but could possibly have different wholesale costs, there could be fairness issues to the end user one way or the other.
I don’t understand what all the fuss is about, there are different wholesale models today with a mix of ISP owned DSLAM’s with their own wholesale cost base which would differ from one ISP to the next.
The wholesale DSLAM cost base for TPG and iiNet for example would be different to each other, this coupled with the Telstra LSS and ULL pricing and whatever backhaul agreement with a supplier they have out of a particular exchange determines the cost base to which they add their retail margin to their ADSL2+ and Naked DSL plans.
They also sell these plans alongside Telstra Wholesale sourced ADSL2+ plans from those exchanges they don’t have a business case to put DSLAM’s in, the business case basically being it is more cost effective to just resell Telstra.
I don’t foresee any ‘it’s all to hard’ scenario when they have to maybe sell NBN Co FTTN and FTTP plans alongside each other, it’s handled ok all over the world by RSP’s.
Its not an “its all too hard” scenario, its an “its unfair” scenario.
Someone connects at 50 Mbps to iiNet, to pick one supplier. How do they get charged?
Under NBN Co’s rules, who are trying to get a return on investment, there are CVC charges applied to the ISP. Depending on the technology forming the basis of the connection, that CVC charge might be different from one person to the next; the point of the article. For arguments sake, $30 for FttN, $32 for HFC, $35 for FttH.
It shouldnt be complicated to see why there is likely to be different CVC costs, with loop length, contention, and upload capabilities being noticably different from one to the other.
So what does the ISP do? Multiple charges reflecting the differing CVC costs or, because its only selling a single feature of (“up to”) 50 Mbps, have a flat rate and let the user suffer, depending on what they have available?
What does ther user do when they only have 1 option? What are their rights, and would they feel agrieved if they are charged more for less?
The ACCC has some very interesting decisions to make if there is a mix of technologies at the wholesale level as it appears.
The fuss, is that we have to use the copper network, unless you are fortunate enough to be in an area where the fibre has been rolled out, and or the copper is at a stage that it needs to be re-mediated.
Whilst I didn’t necessarily agree with the monopoly that would have been created by NBNco, it was a logical decision made to ensure the network paid for itself. It also had a lifespan.
Telstra on the other hand, are a private monopoly that has proven time and again, both their willingness to stifle competition with their monopoly and to take as much from the consumer as possible.
I would rather a regulated government monopoly than a regulated corporate monopoly.
The FTTH NTU has ethernet ports on it.
I suspect:
When you provision a service on it; if you have a single computer in the house, you need nothing more.
A single computer can connect to the one port on the NTU and get full internet access (I am going to bet it is a DHCP assigned address – but this will be up to your ISP). (please turn on your firewall though.)
If you need to connect more people, want wireless users etc then you’ll need a NATing router of some description.
My old WRT54g that I flashed one of the variants of the OSS operating systems on it could do this – you can setup the interfaces on different networks, thus performing NAT on what is traditionally one of the local-network interfaces.
Alternatively I also bought (18 months ago?) a new ADSL wireless router, that included a seperate “internet” ethernet port, so; when my NBN connection is completed (construction has commenced!).
The alternative is that NBNCo abandon speed tiers altogther and simply charge a flat connection fee. The differentiator in plans would then be the amount of data that could be transferred.
The situation with TPG rolling out their own FTTB solutions is very similar to the current ADSL2+ market where prices are cheaper in exchanges where the ISP has their own hardware installed. Prior to the NBN, fibre was already being installed in some new estates by independent operators.
The other area to consider is pricing of monthly connection and data charges for direct fibre where the premises owner has paid for the installation of fibre.
No.
Just no. I have explained on numerous occasions why this won’t work Mathew and in all instances you have ignored my arguments.
> Just no. I have explained on numerous occasions why this won’t work Mathew and in all instances you have ignored my arguments.
I didn’t ignore your arguments, I just found them based on false assumptions and without merit.
Oh, so… let me get this straight.
You’ll willing to repeat arguments ad nauseum, despite numerous protests, despite numerous arguments presented against you from multiple people, without any attempt to revise your position, without ever addressing the counter arguments presented… and the reason you do this is because those arguments are “without merit”.
Do you have any idea how arrogant this is Mathew? Any idea? This isn’t just having a strongly justified point and being smug in your correctness, this is completely and utterly ignoring any and all attempts to engage in conversation with you.
I have snipped my arguments down to their bare minimums, I haven’t explored them, because I expect intelligent conversation. And what I get from you is silence.
So if speaking unopposed was your goal, you got it. Soapbox away.
From memory the basic arguments are:
1. There never ever be close to 50% of fibre connections at 12Mbps – demonstrably wrong
2. Fast speeds will put too much load on the NBN network – demonstrably wrong because it is data transfer not speed that places load on the system
3. CVC should be abolished – bad idea because it will lead to congestion because it doesn’t provide additional revenue as network load increases
4. RSPs need to be protected by NBNCo from fast speeds
5. Labor plan good anything else bad
Your memory is faulty. Arguments were actually:
1) It was a conservative estimate of future demand.
2) Backhaul is not free and is only cheap because it’s oversupplied and oversold.
3) This claim was never made by me. I suggested it be reduced and subsidised.
4 and 5) Stop making stuff up.
> 1) It was a conservative estimate of future demand.
Except the estimate on speed tiers has been shown to be accurate on 12Mbps and more people on 100Mbps connections, which is creating a digital divide.
> 2) Backhaul is not free and is only cheap because it’s oversupplied and oversold.
Within NBNCo’s network there is no evidence that backhaul links are under provisioned or that adding more would cost significantly more than the increased CVC revenue that would be driving the load.
> 3) This claim was never made by me. I suggested it be reduced and subsidised.
> 4 and 5) Stop making stuff up.
So in summary, your only argument is that backhaul within the NBNCo network would be too expensive relative to the increased CVC revenue?
No Mathew. My point was you haven’t been paying attention to my arguments or anyone else’s for that matter and worse still you’re placing words in our mouths. As you continue to do as demonstrated by the above.
I’m willing to discuss and debate this with you, but not under these terms. Since you are not willing to engage in civil commication this conversation and any other threads we are having are now terminated.
6. It costs more for those users that can’t afford it.
Without speed tiers, the minimum price of an NBN connection is higher. (remember, 12 is below recovery cost).
Your plan would create a digital divide that is infinitely worse. (actually infinite!) since they wont get any fixed line internet plan at those prices.
“Prior to the NBN, fibre was already being installed in some new estates by independent operators.”
Which is all being/has been folded into NBN Co. It’s an entirely different thing – with infrastructure competition companies such as TPG and Telstra can build their own FTTB and FTTP networks that they can then either resell in competition to NBN Co or keep to themselves, making them a vertically integrated ISP who can profitably undercut NBN Co while delivering a superior service (in the case where they are offering FTTP and NBN Co only has FTTN). You would call this efficient market driven competition giving consumers more options at more competitive prices, but the end game is the way such an environment undermines NBN Co’s profitability and financial viability, resulting in runaway debt and a financial liability drain on government finances until they decide to give it away to someone else to deal with for significantly less than it cost to build (Telstra 2.0).
So sure, short term consumers think they have more choices and maybe even some better prices, but long term they will pay for it when NBN Co collapses, they will pay for it with an inferior network that is much harder to maintain, diagnose and repair, they will pay for it when they find themselves locked into monopoly providers in certain areas (telco ghettos), they will pay for it as the rest of the world moves forward with universally available, universally affordable broadband and communications while we are stuck with expensive, unreliable, underperforming infrastructure that fundamentally prohibits Australians from being able to function in a competitive or collaborative or cohesive way with people, companies and governments throughout the rest of the world.
But, you know, next year you’ll have the illusion of greater choice and price competition that will convince you that the LNP have done you and your countrymen a great service – it will take decades for the real effects of this to finally hit home. So why not dig right in and enjoy your ‘free lunch’ now, right? May you f#@$ing choke on it.
‘with infrastructure competition companies such as TPG and Telstra can build their own FTTB and FTTP networks that they can then either resell in competition to NBN Co or keep to themselves,’
They cannot keep it to themselves under Coalition policy.
“They cannot keep it to themselves under Coalition policy.”
Where does the Coalition policy document explicitly prohibit this, Fibroid?
Thanks for ascribing to me views that I don’t hold. I’m actually in favour of regional non vertically integrated monopolies where the operators either pay or are subsidised by the government to run the service. The ACCC has neatly created 121 separate networks.
The value being delivered by Labor’s network is appalling. Under Labor’s plan we would have become the laughing stock of the world having build a FTTP network where 50% of connections are slower than HFC, FTTN, 4G and approaching half of ADSL connections. In 2028 Labor’s plan was for less than 5% to have 1Gbps services in 2028. Today that would put us behind many of our competitors, let alone in 15 years time.
Here you go again Mathew. And I thought you were cured. Will you ever stop talking about the 50%? How many times have you mentioned this, not just here, but everywhere you could? Do you think that by repeating it endlessly, people will start agreeing with you? Or is it that you are OC?
> Do you think that by repeating it endlessly, people will start agreeing with you?
In the NBNCo Corporate Plan 2013, there is this statement:
“As at 30 April 2013, 26% of NBN Co’s FTTP End-Users were on the highest available wholesale speed tier (100/40 Mbps), whilst 47% were on the entry-level wholesale speed tier (12/1 Mbps). These compare with 18% and 49% respectively forecast for FY2013 in the 2012-15 Corporate Plan.”
One of Labor’s few predictions that 50% would connect on fibre at 12Mbps has been shown to be correct. Only a truly incompetent government could succeed in building a FTTP network where 50% of connections are slower than HFC, FTTN, 4G and approaching half of ADSL2+ connections.
You are really incurable.
The fact that you would take this as an invitation to repeat the same stuff again shows a deeply troubled you are.
Are you suggesting that NBNCo are incorrect when they state that in April 2013, 47% of fibre connections were 12Mbps?
Mathew, ignoring percentages, there’s a humongous, glaring flaw in your argument.
People only take up 12Mbps services because they have determined they don’t need better; in other words, they make use of less than 12Mbps. If you give them 25Mbps+, they will still need no better; they will still make use of less than 12Mbps (although the difference is, under the existing pricing structure, they will be paying more). You are not giving them any more value.
It’s like giving someone 2L of milk instead of 1L of milk, when all they’ll drink is 750mL. Lucky them, they get more milk they won’t drink.
If they later decide they need 25Mbps, under the Liberal plan they will get it (by default), and under the Labor plan they will also get it (obviously) – there’s no difference; the number of people who will use the most basic service is the same. In other words, 47% of people are getting exactly what they have decided they need, and giving them more than that “just because” is wasteful and of no value to them. How could you see that as a good thing, Mathew?
Remember, the digital divide is not about inequality (heterogeneity); that is, it is not about there being different levels of speed and different services across the country. The digital divide is about inequality of opportunity; that is, those who wish to pay more for some given value currently cannot do so consistently and fairly. People paying $70 a month are getting 2Mbps in one street and 20Mbps in another; others get 100Mbps cable while their next-door neighbour is stuck on 4G; others who are prepared to pay for a similar service cannot get one at all. That’s one of the main things that the Labor NBN sought to address, by maintaining a consistent wholesale price, and encouraging retail competition; but we can argue how successful they have been at that.
Is this all now clear to you? Will you stop repeating such a fallacious argument?
Another thing Mathew likes to ignore Harimau, is the fact the the FTTN will be offering 12Mbps as well…
> People only take up 12Mbps services because they have determined they don’t need better; in other words, they make use of less than 12Mbps. If you give them 25Mbps+, they will still need no better; they will still make use of less than 12Mbps (although the difference is, under the existing pricing structure, they will be paying more). You are not giving them any more value.
I would argue that people are taking 12Mbps services because they are the cheapest service available. Back in ADSL1 days, people purchased 256/64Kbps. VoIP becomes reasonable at 512/128Kbps and video conferencing is significantly improved at 1500/256Kbps but many people didn’t spend the extra because they couldn’t justify the money on leisure activities.
> It’s like giving someone 2L of milk instead of 1L of milk, when all they’ll drink is 750mL. Lucky them, they get more milk they won’t drink.
You are confusing quantity with speed. If I increase the speed of your commute to work by 10 fold you will still make the same number of journeys but the value will be greater. Of course, because it only takes 3 minutes instead of 30 minutes to travel between work and home you might find that in fact you come home for lunch or go back into the office for a couple of hours after dinner.
> Remember, the digital divide is not about inequality (heterogeneity); that is, it is not about there being different levels of speed and different services across the country. The digital divide is about inequality of opportunity; that is, those who wish to pay more for some given value currently cannot do so consistently and fairly.
What you are clearly missing is that not everyone who wishes to pay more can afford it and some of those people (e.g. mobility challenged people) could benefit significantly from fast broadband with services like high quality video conferencing.
> People paying $70 a month are getting 2Mbps in one street and 20Mbps in another; others get 100Mbps cable while their next-door neighbour is stuck on 4G; others who are prepared to pay for a similar service cannot get one at all. That’s one of the main things that the Labor NBN sought to address, by maintaining a consistent wholesale price, and encouraging retail competition; but we can argue how successful they have been at that.
Under the Coalition plan, fibre on demand will be available for those people who request it. You are also ignoring the fact that many rural towns weren’t going to receive FTTP even when their towns were passed by backhaul, but would benefit from FTTN.
I’m not against a consistent wholesale price or retail competition. The problem is that Labor’s plan was leading to an entrenched digital divide in Australia and lead to a mediocre network that delivers little real world benefit over FTTN for the majority.
> Is this all now clear to you? Will you stop repeating such a fallacious argument?
It is clear to me that you don’t understand the point I’ve been making and that your argument is lacking.
It might be worth you pausing for a second to consider what it would cost to take those fibre connections which are already capable of 1Gbps and removing the speed tiers? Once you’ve calculated the cost, consider the increased revenue from data downloads and benefits from a faster network.
Two problems with your point of view/ideas Mathew.
1. Where does that leave folks that just need their internet for email and the odd bit of facebook? Even 12Mbps is probably overkill for them, why should they pay extra?
2. I’m not against a consistent wholesale price or retail competition. The problem is that Labor’s plan was leading to an entrenched digital divide in Australia and lead to a mediocre network that delivers little real world benefit over FTTN for the majority.
The FTTN network is more mediocre again, and has no benefit at all over FTTP in your context, considering it offers the exact same system but will never be able to offer the speeds available on the FTTP network. Initially, people will only be able to access two speeds (12 and 25), and later a third speed (50). FTTP offers all those, and all the rest, up to 1Gbps.
In some ways, and considering your goals, your cutting off your nose to spite your face…
The value being delivered by Labor’s network is appalling. Under Labor’s plan we would have become the laughing stock of the world having build a FTTP network where 50% of connections are slower than HFC,
And under FTTN, that will be 73%…
“having build a FTTP network where 50% of connections are slower than HFC”
Not so. Those FTTH connections are capable of delivering whatever speed the customer chooses.
Just because many may settle for the cheapest, lowest speed plan at the moment has nothing to do with it being a ‘laughing stock’ end product as is likely to be the case now
And what evidence is there that the “market solution” will deliver cheaper prices for consumes in 10-30 years. And even if cheaper will it be for the same quality of product?
Is the market willing to settle for a 7% profit?
Is the market willing to provide equivilent quality?
Is the market willing to lose money in some areas if they are getting large profits in others?
BTW, love click to edit :)
PS http://www.change.org/en-AU/petitions/the-liberal-party-of-australia-the-people-of-australia-want-to-help-our-government-build-a-fibre-nbn?share_id=WYBhxBXbrV&utm_campaign=share_button_action_box&utm_medium=facebook&utm_source=share_petition
“Is the market willing to settle for a 7% profit?” — in FttH world, yes, because its dictated by the single wholesaler. In FttN world, nobody knows, because the plan to recoup the costs to the Govt are scetchy at best.
“Is the market willing to provide equivilent quality?” — same thing. FttH world, because there’s only 1 wholesaler, then they ARE the market. In the expected FttN world, competition means there’s no guarantees one way or the other.
“Is the market willing to lose money in some areas if they are getting large profits in others?” — same again. NBN Co, as the sole wholesaler for FttH can predict with a high degree of accuracy what they will get back overall. That means they can absorb the less profitable areas thanks to the highly profitable ones.
FttN, again, no call yet, because it encourages cherry picking and you get that exact issue of catering to the most lucrative areas at the expense of the less lucrative ones. Its what got us in this situation in the first place, along with Howards failure to separate Telstra.
What evidence is there about the future? None. Evidence is something that proves a point, and you cant prove something that hasnt happened yet. Not even the sun coming up tomorrow, though the chance of that NOT happening is incredibly small…
But if you want a prediction, its the same yet again. FttH, being a wholesale monopoly, means the ISP’s compete on a level field, so competition is in features and pricing – give extra (IPTV, shared accounts, etc) and you charge a little more. Just give internet, prices will eventually homgenise into very similar pricing.
FttN, being a wholesale competitor with ISP’s, cant provide the same uniform “wholesale cost + profit margin” model that FttH does. So its possible the consumer suffers. Alternatively, its based on a capped cost to the consumer (FttH being a capped wholesale cost), so its also possible that the FttN model could end up better for the consumer.
Thats one of the things being pointed out at the moment. There just isnt enough info about the Coalition plan to make any real judgements yet. The Labor model made things very predictable, because it was so simple and uncomplicated. Bringing the ISP’s back in as wholesale competitors means a lot of the answers for the Coalition plan wont become clear for years.
To quote Sir Walter Scott: “Oh what a wicked web we weave, when first we practice to deceive!”
There’s every chance that Turnbull will simply throw his hands up in the air and proclaim it all as being “Too difficult and too expensive.”
This is a nightmare waiting to happen.
One of the fundamental design factors with any network is to keep it as simple as possible. Turnbull in his arrogance ignores this. It’s what I’ve come to expect from the man who practically invented the internet in Australia….
Even if the speed was the same for the same wholesale price between all technologies. Can the retail price remain the same? Will RSPs subsidise the increased support for FTTN by spreading the cost across all customers? The reason I mention this, is a large proportion of support time must be taken up by the issue of faulty copper. Family, friends and I, have all at one time or other been the victims of bad copper, and I know if can mean repeated very long calls to RSPs support centres, repeated tests, trial modems sent out, vision stream or similar sent to check the lines, repeated Telstra visits. Given the small margins RSPs work on, a few bad support problems could wipe out all profit on a customer for years.
Putting aside the incorrect assumption that the fault report rate on PSTN can be directly transposed on top of FTTN the RSP’s don’t have to worry about what it costs the infrastructure owners to fix faults, and the effect on their own margins, this is the same principle if it be FTTP, FTTN or FTTB, they log the fault on behalf of their customer and pass onto their wholesaler.
Are you really that naive? Yes, RSPs are not directly responsible for faults, but ultimately RSPs do have to pay to fix them. If an RSP finds their wholesaler is having a large number of faults, they will get concerned, because those maintenance costs will translate into higher wholesale costs.
And often, an incorrectly reported fault is chargeable directly to the RSP. Meaning that the RSPs often err on the side of caution when reporting a fault because if they’re wrong, they’ll get stung, meaning they are given a disincentive from making fault reports.
@NightKhaos
So how is this extra layer of FTTN fault reporting translated to a increase in FTTN plans overseas, overseas RSP’s have been selling FTTN plans alongside FTTP plans for many years?
Compared to what exactly?
Your question doesn’t make sense in context of this conversation.
This is the context, your words.
‘If an RSP finds their wholesaler is having a large number of faults, they will get concerned, because those maintenance costs will translate into higher wholesale costs.,
If FTTN has a higher number of faults relative to FTTP, how has this translated into higher FTTN wholesale costs overseas?
Higher FTTN wholesale costs compared to what?
My point was that high number faults translate to high costs. This is trivially true.
You’re now trying to twist that into comparing FTTN and FTTP. So I ask again: compared to what? You can’t directly compare FTTN and FTTP prices because they have different capital costs, difference performance windows, etc.
So Fibroid, what are asking me to compare? Because your question makes little sense in context.
NVM you have downgraded it to being ‘trivially true’.
Explain how a network with more faults is cheaper to operate. (non trivially if you need)
With FttH if there is a line fault, its going to be fiber 100% of the time. With FttN, it isnt. So there is an extra layer of support needed to a) figure where the fault is, and b) figure out whos responsible for fixing it.
That adds more support cost. If the fault is in the copper portion, you then have the issue of whether its fixable, or needs replacing. If replacing is the choice, replace with copper or fiber. If fiber, who rolls it out. All those add time costs and complicate things.
I dont think its unreasonable to allow for those additional complications to be put on the PSTN. There is enough anecdotal evidence showing the copper lines to need replacing to assume a fair portion of faults with a FttN network to be from that source.
So please, feel free to disagree with peoples opinions, but dont dismiss them out of hand and call them incorrect. Not when reality suggests otherwise.
“With FttH if there is a line fault, its going to be fiber 100% of the time. With FttN, it isnt. So there is an extra layer of support needed to a) figure where the fault is, and b) figure out whos responsible for fixing it.”
that’s not the isps problem. if it doesn’t work, the rsp doesn’t have to locate it on the fibre or the copper. they fault it. its the techs job to work that out.
That doesnt change anything. The fact that the fault could be either line adds an extra layer of support needed, which can only be more expensive. If its 100% fiber, you only need fiber experts. If its a mix, you need people trained in both.
And with extra skilling and support needed, there is an inevitable increase in support costs. Someone has to pay for that extra cost, and I highly doubt the ISP’s will simply absorb it. It will be passed on to the consumer.
So of the two plans, which needs a wider range of skills for support? Essentially everything needed to support FttH will also be needed for the fiber portion of FttN, and then you have the copper expertise on top of that.
fibroid is claiming that the extra expense shouldnt be attributed to the PSTN part of a FttN build, when I’m maintaining that the very fact the copper is still there justifies at least the consideration. The bulk of problems today are closer to the user than the exchange, and the nature of that is very likely going to translate to the copper loop portion of a FttN build.
If people want to get caught up in fine details, go for it, but when a build is a mix of new and old, I’m willing to bet that any ongoing issues are going to come from the old portion rather than the new part. In this case, the copper.
“Putting aside the incorrect assumption that the fault report rate on PSTN can be directly transposed on top of FTTN”
I didn’t say it directly transposed, but the faults with copper can take a long time to track down. Most faults have been in the area near the residence, the copper used by FTTN.
“RSP’s don’t have to worry about what it costs the infrastructure owners to fix faults”
I never said they have to pay cost. i said they had to have support people taking lots of time talking to customers, wholesalers, etc, to get a fault fixed, especially given the intermitent nature of some copper faults.
“the effect on their own margins, this is the same principle if it be FTTP, FTTN or FTTB, they log the fault on behalf of their customer and pass onto their wholesaler.”
No, the amount support resources for a copper fault is much higher than for the FTTP NBN model.
1. The NTU and cabling to it are all supported by NBNCo. The only thing to test is that the problem isn’t the users connection to this.
with copper you have:
1. The cabling to the Modem/router
2. The modem/router
3. The connection to the wall socket
4. The premises wiring if it is beyond the first socket.
5. Filters
6. MDF, if an MDU
Now you are into the wholesaler supported area.
Also fibre tends to work or not, copper is more likely to have hard to find intermitent faults.
Try not to distort reality to suit your agenda.
@Lionel
‘I said they had to have support people taking lots of time talking to customers, wholesalers, etc, to get a fault fixed, especially given the intermitent nature of some copper faults.’
I am not aware of any hard data from RSP’s that show their support people spend significantly more time on a Telstra related faults than NBN Co faults, and you would of course have to factor in the vast customer base still on Telstra Wholesale infrastructure vs NBN Co.
‘No, the amount support resources for a copper fault is much higher than for the FTTP NBN model.’
Which gets us back to the above point again, additionally I would have thought that FTTN fault diagnosis on the much shorter copper link would be much more sophisticated than old technology PSTN/ADSL exchange based DSLAM diagnosis based on very long line lengths, where you also have old pillar problems added to that fault diagnosis
Well iiNet have come out and said FTTP NBN has been very reliable. If you don’t want to draw any conclusion on cost of support without someone putting figures in front of you, fine. To most it’s bleeding obvious. You only have to have been involved in a few cases where people have had a bad line to see how much time it chews up on the phone to customers, hours, and that isn’t including Telstra wrangling. Yes, I’d say fault diagnoses would be simpler with FTTN, but not as simple as with FTTH.
Look, I just give up on you. You obviously just trying to be an apologist for MT and rational discussion has zero effect on you. You’ll twist and weave through the tiniest loophole until someone checkmates you, then disappear, only to start on with the same derp somewhere else. No time for you, bye.
The chaos part is what bothers me. Its both moving from a relatively simple framework to a complex one – which I’ve always argued in effect means costs. And as you say it is chaotic – where no one knows what is going on, its very easy to slip in fees and charges for obscure reasons, easy for things to be overlooked or outright forgotten. Again, I say, costs.
This in tandem with the Telstra Old Boys club does not at all bode well. A looming Clusterfk in fact. Whether Malcolm will see/let have myself see these problems is the thing. my personal odds sense on the ‘throwing up the hands and sticking with it as is, improving costs’ option has lengthened considerably. ‘Its all too hard, bin the lot’ comes short a bit but ‘barging on and creating a Telstra mistake mkII clusterrfk’ is still the shortest odds for me. Depressing.
Mammoth article Renai! Great read and some very interesting points to make the old brain tick over.
Cheers :)
Why assume that cost will be somehow determined by the quality of the service you receive? If anything I’d argue that in Australia the more you pay the *less* quality you’ll get.
Renai
Couple of typos
“which refers to the sees ISPs charged ”
“So, for example, NBN Co might $35 per month for a FttP service at 50Mbps”
I’m way past worrying about typos in my articles, dude, I suggest you get past it too ;)
I am not worried. In the past when people have pointed out typos, you have thanked them and corrected them. I thought you would appreciate it. I was wrong. Fine with me.
Heterogeneous instead of heterogenuous. I’m one of these fusspots who think typos detract from the quality of an article. The article is well-written but it would be better without the typos.
Please Renai, the singular of premises is premises.
Huh?
You keep writing ‘premise’ for a single building connected to the network, as in the singular of premises. But the singular form of premises is premises, not premise. A premise is the basic foundation upon which an argument, theory or supposition is based, not a single dwelling or structure – one of those is a premises, more than one of those are premises. You don’t drop the ‘s’.
And, no offence, but dismissing typo’s, misspellings and grammatical errors out of hand, particularly when someone has taken the time to try to help you out by drawing them to your attention, doesn’t reflect well on your interest in quality, which then transposes to the perception if quality of your writing and articles generally. Completely up to you if you want to take this approach, but you should be aware of the effect it will have in educated readers – we expect quality copy as a bare minimum from professional journalists, so that lack of it does directly affect our perception of your abilities and overall professionalism. Not attacking you, just pointing out that just because you don’t consider it important doesn’t mean others feel (or even should feel) the same way.
http://delimiter.com.au/2013/04/22/pushed-for-coalition-contingency-plan-nbn-co-reveals-rollout-costs/#comment-607328
Yes, it’s hard to ignore.
So, basically, the LNP “plan” for a technically agnostic NBN is a Cluster Fuck? (*) (**)
Sorry for the language, but I believe it is the simplest explanation.
“Faster, Cheaper” does not equal Better.
The LNP want to spend an awful lot of our money on a network that will be terrible and technically obsolete!
Cluster Fuck indeed1
We will lament their decision for decades I feel!
(*) feel free to edit the F-Word if you like mate.
(**) Charlie Foxtrot.
BT’s now moving past FTTC: http://www.lightreading.com/broadband/fttx/bt-trials-huaweis-gfast-for-fttx/d/d-id/706166?f_src=lightreading_sitedefault
And SAK, an electricity provider in eastern Switzerland now has passed 10,000 premises, even though Swisscom is already doing a VDSL rollout: http://www.saknet.ch/desktopdefault.aspx/tabid-997/1074_read-932/
Which in itself isn’t that big news, other than to contrast that with a bit of trivia on how progressive they are… they allowed women to vote in Appenzell Innerrhoden, partially covered in this rollout so far, in 1991.
@quink
‘BT’s now moving past FTTC’
When I saw how you phrased it it seemed as if the BT FTTP rollout was passing the BT FTTC rollout, but all it is a trial on a faster FTTC standard.
‘”BT Group plc (NYSE: BT; London: BTA) noted recently that it would be scoping out the potential of G.fast as part of its fiber-to-the-distribution point (FTTdp) plans: FTTdp is the next step on from FTTC, taking the physical fiber even closer to the end user but still utilizing the copper tails already in place.”
“BT’s access network is well suited to G.fast deployments, as the operator has about 4 million distribution points that are suitable for FTTdp rollouts.”
The key point being of course they will still be utilizing the copper tails already in place, I am sure the NBN strategic review will have that information before them on how FTTN has progressed a hell of along way since the Labor appointed expert panel looked at it over four years ago.
Using copper tails as your basis for connection capability is significantly different to using copper loops.
As the copper length gets shorter, the potential speeds increase. Thats how copper works – there is less length to create the resonance issues that limit coppers capabilities, so you can push more data through at a faster rate. And you know that.
So a 50m copper tail can handle plenty of speed, not really sure how much, but a 1 Gbps connection wouldnt surprise me, and its probably quite a bit more. Thats not the problem, its where the system is designed for the copper to be ten times that length. It simply cant meet our needs beyond several years.
The whole debate between FttH and FttN isnt necessesarily about those specific technologies, they are just the endpoints of the 2 arguments. It’s about having a system that can be sustained well beyond the completion date, and the use of copper is significant to that argument.
The shorter the copper, the less argument you get from FttH proponents, because a short enough copper length can deliver the predicted needs for decades to come. Ideally the length is zero (if only for current and future maintenance issues), but if you bothered to read most peoples comments, there is a recognition that some length works.
Something you continualy ignore is what happens in 2021 if we’re tied to a predominantly FttN build. At our current growth, our standard needs should hit around 100 Mbps at that point, something a 500m loop cant deliver. So why build to a standard of 500m?
Ah
The maintenance nightmare.
Stocks of spares for each variant and technology will have to be held. Some of the smaller private companies installing FTTB and or FTTP within MDU’s and business and industrial areas are using equipment from many vendors, some Asian, some US or European, guess even some Australian. In most cases these are not interchangeable.. Then add in the fault location and rectification, FTTN Cabinets in a warming Aust with their stationary batteries in a world of increasing home Solar PV systems with battery storage.
Oh what fun ahead
Yes I have often wondered how these BT FTTN cabinets in the UK work, with the freezing well below zero winter temperatures coupled with blizzards and snow especially in Scotland and then the summer heatwaves in the south, I guess they close BB communications down in the winter and restart it in spring.
BTW I don’t think you have to worry about losing any sleep about the looming ‘spares problem’ , Australia won’t be designing their own cabinets and internals, they will be cabinets with internals used the world over, the same as FTTP.
Wow, you really are a case study in self deception and cognitive bias.
+1
What he said…
This may be news to you Fibroid, but electronics love cold (in fact they work very, very well at very low temps).
Heat however, kills them faster than anything, and will be an issue we need to address that BT didn’t have to worry about.
“This may be news to you Fibroid, but electronics love cold (in fact they work very, very well at very low temps).”
+1 We regularly cool electronics down by something like 200c in extreme over-clocking… try heating it up by that :)
Fibroid.
relevance
Some of the smaller private companies installing FTTB and or FTTP within MDU’s and business and industrial areas are using equipment from many vendors, some Asian, some US or European, guess even some Australian
One written up in the unOz stated using equipment from 5 US vendors. (best deal at the time).
Then of course we have Indian technology also available
Suggest some due diligence, they have heaters (for the batteries)
“The simplicity of this model has always been its strength.” No, the over-simplicity of this model has always been its weakness. It was as silly as the government saying they were going to buy out all the car manufacturers, build V8 Commodores for everyone, but disable some of the cylinders for anyone who didn’t want V8 performance.
Seriously…
I’ve heard some silly car analgies and this is second silliest only to ‘before roads, there were no roads.’
Dear Gordon Drennan.
Fixed line download amounts have increased 62% from the quarter ending June 2012 to the quarter ending June 2013.
If you can include in your car analogy either an annual increase of 62% or include in your analogy a time frame over which an increase of 62% took place and consider that to be a very short interval in this analogy, I’ll be happy to go with car analogies.
Until then, your permission to use car analogies for FTTH or FTTN or even tin cans or anything is going to be revoked.
There is one really simple way to charge fairly on a heterogeneous network. You charge exactly the same way they charge on all the other essential public utilities like electricity and water and gas. Per unit consumed. It is an essential public utility isn’t it. That’s what you lot all said when you wanted to justify it. Why should this one be any different?
Not everyone gets charged per unit on all utilities – I get charged a flat rate for my water consumption, no matter how much I use as an example.
Having said that, its not necessarily the worst idea ever, but there would be issues. Maybe a per unit charge for uploads, thats where the real difference between the technologies is, but thats such a fundamental change from the current norm of not even counting uploads that I cant see it working either.
Thinking it through, I cant see it working. Let me explain.
At the moment, they leverage off the fact that 95% of users only use around 10% of their limit, so are cherry picking those clients to cover the data hounds. You’d be canibalising their profits, which they wont go for.
So those 95% that only use a small portion would only be paying a small amount per month. They arent going to make enough out of the data consumers to maintain their profits, which is an issue.
If you want to toss numbers out for arguments sake, its going to end up being that everyone ends up paying more. The RSP wants an average profit per user, and if you’re just charging on a consumption rate, the vast array of people end up with a higher per gig rate as a result, especially when you factor in the CVC cost the consumer sees as part of their bill.
Props for thinking outside the box though. If you can see solutions to those sorts of issues, feel free to put them out there. Its an idea worth discussing as it may be one way to simplify things – charge CVC plus consumption, and put everyont on the fastest speed possible.
*edit* interesting, if you edit your response (I added the last sentence) the click to edit function keeps counting down. It doesnt reset to 5 minutes just because I changed something. Worth noting.
> Not everyone gets charged per unit on all utilities – I get charged a flat rate for my water consumption, no matter how much I use as an example.
In a country with chronic water shortages that is crazy. I’m charged a connection charge based on the value of property, plus usage charges.
> If you want to toss numbers out for arguments sake, its going to end up being that everyone ends up paying more.
Why NBNCo’s costs are relatively fixed. Adding extra network routers or upgrading GPONs is relatively cheap compared to rolling out the fibre. Competition between RSPs will keep prices down.
> At the moment, they leverage off the fact that 95% of users only use around 10% of their limit, so are cherry picking those clients to cover the data hounds. You’d be canibalising their profits, which they wont go for.
A big advantage that Telstra has is a higher percentage of low quota customers who are less demanding. The problem with unlimited plans is that they tend to attract only high volume users and hence suffer congestion. Clear evidence of this is the failure of Internode’s flatrate plan where they couldn’t attract enough low usage customers ( The RSP wants an average profit per user, and if you’re just charging on a consumption rate, the vast array of people end up with a higher per gig rate as a result, especially when you factor in the CVC cost the consumer sees as part of their bill.
Typically people talk about margins (e.g. 10% per customer). The total bill is what is important not the connection / usage charges. When considering RSP profits it is also important to understand that people on low quota plans put barely any load on the network when compared with high quota users. This becomes even more true when network speeds increase.
> If you can see solutions to those sorts of issues, feel free to put them out there. Its an idea worth discussing as it may be one way to simplify things – charge CVC plus consumption, and put everyont on the fastest speed possible.
Did you mean AVC plus consumption?
If so this is a very reasonable plan. However the big difference between the internet and other utilities is that you cannot readily observe consumption like other utilities (e.g. light is on, tap is running). This means it is possible for someone to run up a large bill without realising it.
In fact, NBNCo state in their Corporate Plan that higher speeds will lead to more data being downloaded. The effect of this is that CVC prices will fall dramatically. In fact if speed tiers were removed, CVC prices could be cut dramatically because instead of purchasing a minimum of 200Mbps CVC per POI, RSPs would need to purchase 2000Mbps. The effect of this increase in capacity could lead to huge increases in off-peak quotas.
Yeah, might have gotten a term or two wrong in that :) With the number of acronyms in play that look similar, I wonder how many times I’ve been wrong.
Water usage; I own a flat, its not actually that uncommon. They factor the overall cost for the block, and aportion the cost depending on unit size. Smaller 1 bedroom unit pays about 2/3rds I do, because they are 2/3rds the size.
A lot of MDU’s do this, because they dont separate the water usage for the individual premise. Not all, but plenty. That doesnt mean the block is unmonitored, just that they put a flat charge on.
As for costs, what I’m getting at is that if you change it to a wholesale charge plus usage, those small volume users are going to be hit with the $35 wholesale charge, plus only a couple of dollars more, while effectively only 5% of the users are going to be hit with anything significant.
Call it 10c/gig, and they use 20 gig, then they’re hit with $37 or so, while the larger consumer might get hit with $100 for using 650 gig – both getting a $35 wholesale charge plus consumption. The first user is close to $2/gig, while the 2nd one is closer to 15c/gig
From the ISP’s perspective that makes it hard to manage. They want consistency, and thats harder to get with a varying amount. Thats not to say its not possible, but the infrastructure costs involved are different for Bigpond than Telstra for example so they would need to do some rather broad restructuring for it to work. Which I dont think they would like.
Not saying it wouldnt work, I think its worth debating, but a static pricing mentality is going to be hard for them to reverse.
If you push the base price up per gig to get more from the small users, the big users suffer drastically, and as you say it might be something they might not be aware of. Little personal story. Not that long ago, I have my mobiles internet switched on and went to check Facebook. It got stuck in some sort of update loop, and ended up DL’ing 650 meg before I noticed. I had a 250 meg limit – I dont use it much.
So I happened to notice my next bill was excessive, which is how I noticed, and when I was able, saw the spike in use was on just 1 day and figured out what had happened. Thats not something you can guarantee can be detected easily, before its too late and when you’re talking about NBN speeds you can rack up plenty of use very fast.
Basically, its likely to be setting people up for billshock which is never a good thing. If you put a cap on the cost, its defeating the purpose, and the high user takes advantage once he hits his cap putting us right back where we are now.
I think you are making the pricing more complex that it needs to be. As you’ve suggested RSPs would be unwise to move towards plans that charge for excess data because of bill shock, so the structure of retail plans would remain the same, except there wouldn’t be a speed tier choice.
Current NBN plans are comprised of:
– NBNCo connection charge (AVC) based on selected speed tier
– NBNCo data charge (CVC) which is shared between customers
– RSP costs (backhaul, network equipment, admin, etc.)
– RSP margin
If you remove the speed tiers and also reduce the connection (AVC) charge to drive take-up, then data (CVC) charges need to rise, but RSP demand for CVC would also rise because more CVC would be required to support 1Gbps connections.
The other observation worth making is that NBNCo intend for the revenue from data (CVC) to increase at a greater rate than the revenue from connections (AVC), so this would be just bringing that forward.
I think the pricing can be simple as well, very much along the lines you suggest, but this is about what the ACCC might need to do. Like it or not, there are different technologies in play, with different capabilities, and that means some consideration needs to be given to having different AVC’s for each.
I dont think its as simple as one AVC for all, its not that easy. We’re discussing this around a common speed but you’ve suggested removing speed tiers altogether. That makes the issue for the consumer worse. I’ll have FttH, so at some point in the near future the highest speed will be 1 Gbps.
The ACCC is going to be looking at whether its consumer friendly for a near-guaranteed 1 Gbps speed to be costing the same as an “up to” 80 Mbps FttN connection. Thats where issues arise – the costing similarities or differences between the in reality capabilities of each technology.
Billshock type issues are secondary ones, but the first time someone gets smacked with a $1000 bill because they forgot to turn their torrents off is going to be news somewhere. Or because the kids streamed video 24/7 during the school holidays.
End of the day, there are pro’s and con’s of either option. And as usual, the devil will be in the details.
> I dont think its as simple as one AVC for all, its not that easy. We’re discussing this around a common speed but you’ve suggested removing speed tiers altogether. That makes the issue for the consumer worse. I’ll have FttH, so at some point in the near future the highest speed will be 1 Gbps.
Currently NBNCo charges the same AVC for fibre, wireless and satellite.
If the aim is to give all Australians cheap access to fast reliable access to broadband then a lower AVc has benefits. The reality is that most people will only use a fraction of the potential of a 1 Gbps service, but if the opportunity exists then it is more likely that connections will be used in game changing ways.
Having unlimited speeds will also support the push for FTTP to be rolled out over a wider area, whereas with speed tiers, the counter argument is order direct fibre if you really need it.
There is one really simple way to charge fairly on a heterogeneous network. You charge exactly the same way they charge on all the other essential public utilities like electricity and water and gas. Per unit consumed. It is an essential public utility isn’t it. That’s what you lot all said when you wanted to justify it. Why should this one be any different?
How do you explain electricity tariffs then?
Another area which I haven’t seen mentioned is that another pricing model may be needed for those that pay for a Fibre on Demand Upgrade. Do these people pay the same as FTTN costs (even though their speeds are faster), or do they pay for the same as a FTTP connection (even though they have self funded the fibre extension)?
Certainly looks like the whole thing is going to be a bit of a mess.
Good points Brad…
And yes an antiquated mess, IMO :(
Is this article (and all the comments) for real?
I read one comment and was just flabbergasted.
It doesn’t have to be complicated.
RSP’s can charge minorly different amounts for a 50/4 or 50/20 connection – Nothing will stop that, correct? If the RSP decides to charge a flat rate for 50/4 and 50/20 then the educated end user who can only connect at 50/4 will decide to go to a DIFFERENT RSP who charges marginally less.
People argue for the sake of arguing…
edit: Brad, it doesn’t have to be difficult. There’s many ways of working that out – rebates, discounts, tax implications. It doesn’t have to be this all impossible situation.
Yes Andrew we are aware but I’m flabbergasted that you missed the point…
Which is simply that one off FoD will be much more difficult in many various ways, than having everyone supplied with FttP, don’t you think?
Considering we are reversing from FttP to FttN and then offering optional FttP is just dumb IMO!
And yes you just proved people are arguing for the sake of it :(
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