Home truths: Baxter points out how ridiculous NBN speed tiers truly are


news One of Australia’s most successful and experienced technology entrepreneurs has published an extraordinary analysis of the NBN company’s technical model, highlighting the sheer stupidity of speed tiers on a fiber network which offers essentially unlimited speeds, as well as a wide range of other obvious problems.

Stephen Baxter is one of Australia’s most successful technology entrepreneurs by any measure.

The entrepreneur launches his first startup, the ISP SE Network Access, in his mid-20’s. The business was eventually sold to OzEmail and Baxter went on to co-found PIPE Networks, one of Australia’s most successful telcos. The business laid fibre cables around Australia before listing on the ASX and selling for some $373 million.

Baxter instantly became one of Australia’s richest technology entrepeneurs, and has gone on to further success, becoming a leading light of Australia’s early stage investment and venture accelerator communities and finding popular acclaim as a ‘Shark’ on Ten’s Shark Tank program.

However, the entrepreneur has a very dim view of the current structure of Australia’s National Broadband Network project.

Yesterday Baxter posted an extraordinary article deconstructing the NBN project and highlighting many of the ridiculous ‘home truths’ which continue to plague the project. We very much recommend that you click here to read the whole article.

Baxter noted that the current debate about the NBN was largely limited to whether it should feature ‘fibre’ or ‘copper’-based broadband technologies.

However, he said, there were a whole slew of other issues associated with the NBN which weren’t being discussed.

“I encourage people who want to be informed to research these topics – where research isn’t reading the blogs of pundits!” wrote Baxter. “I am out of the telco game and have no dog in this fight – I just want a real debate fuelled by facts where experts get to supply the facts, not politicians, theorists, academics and those NBN fans who want ‘NBN or bust’ because ‘NBN and bust’ is an option here.”

One of the main issues highlighted by Baxter about the NBN was the ridiculous nature of the current NBN speed tiers.

Currently, users and ISPs who use the NBN are largely restricted to a series of speed tiers — 12Mbps, 25Mbps, 50MBps, 100Mbps and 1Gbps.

However, Baxter pointed out that if you truly wanted to use the NBN project to unlock innovation in Australia, the company should provide only one speed tier — the maximum.

He pointed out that when telcos deployed networks such as the NBN, the cost of operating this infrastructure would be the same, regardless if it operated at 1% of capacity or 95%. The only extra costs relating to downloads come when users pull data from outside the network — usually from outside Australia.

“If you build and own a network it has a fixed cost to operate – so why would you bother to set speed hurdles for customers to access it?” wrote Baxter.

“… why do we have access product speeds such as 12/1, 25/5, 50/20, 100/40 when the network operational cost for everybody to run at top speed (up to 80Mbit/sec on FTTH) does not increase?”

Baxter related the NBN situation to the use of similar infrastructure — roads.

“I pay one charge to use the road for my car – registration, a little more through petrol but I can regulate that through fuel efficiency choices. I do not get charged more if I travel at 100km/hr instead of 85km/hr, nor do I get charged more if I fill all 5 seats instead of just one. Why don’t we have this approach to the network ? Why can’t we view NBN more as a road network in the way it is paid for, used and charged for?” he asked.

A related issue which Baxter highlighted was the Connectivity Virtual Circuit charge built into the NBN, which sees ISPs charged more if their users use more data.

Baxter pointed out that under previous, non-NBN structures, this construct did not exist at all, with such costs being “fixed and known” rather than fluid as it is under the NBN.

The CVC charge was only included in the NBN model, Baxter wrote, because the Government wanted the project to make a commercial return on the project and ensure its NBN investment remained off the Federal Budget.

However, he said, the fact was that high-usage applications such as Netflix had shown the reality that this model was “broken”.

“If the network costs no more to operate then why charge more to the end user, why do we ration a service that has no coupled cost for additional use?” he wrote.

Baxter wrote that the only way to actually utilise the power of the NBN — and, remember, regardless of its underlying technology — was to open the network up, remove all restrictions and give every user the highest speed the network will allow for. This, he wrote, would not actually cost the NBN company more because it had already sunk costs in building the network.

This, in turn, would lead to much higher usage of the NBN network and thus much higher productivity.

“Without artificial speed and data transfer constraints the NBN would be a world-leading innovation fostering tool that would see us actually be able to hold our heads high in these stakes, it would be the equivalent of a 4 lane road on every street with accompanying highways to handle the load – a revolution,” Baxter wrote.

Baxter also has other issues with the NBN — especially its monopoly nature. He also believes there are other ways to fix the competitive telecommunications market in Australia than using the NBN model — including approaches such as “straightening out land access for network build to prevent gaming”; regulating facilities access; re-costing access to ducts ad other facilities (usually owned by Telstra); fixing the number of Points of Interconnect for the NBN; concentrating the build outside metropolitan areas and more.

Again, we recommend you click here to access his full (referenced) thoughts.

“NBN is currently about the monopolisation of the telecommunications access networks in Australia, it is the emasculation of facilities based competition and in return we are getting the world’s most expensive and commercially inflexible network – if we are truly going to reregulate ourselves into this corner let’s at least make the prize worth the pain,” Baxter concluded.

I agree with pretty much all of what Baxter has written here. I commend his article to you. And I will respond in depth to his thoughts early next week.

However, I will note that I have been raising some of these issues for years.

As early as 2011 I pointed out that the crop of NBN plans which were released at that time were trapped precisely within the framework of existing ADSL broadband plans. As I wrote at that point:

“When Apple released the iPad, there were many who complained about features the device lacked which were commonly found on netbooks. When Skype launched its Internet telephony service, there were many who were outraged that it could not immediately dial emergency services. And when Nintendo released its Wii console, there were many who bitched about the impreciseness of its motion-sensing controls compared with a traditional controller. Actually, EA is still bitching.

In all three of these examples, what critics failed to recognise was that the new technologies brought with them a paradigm shift in the way we think about their product categories. Sure, all three examples saw older technology make way for the new. But in all three cases, it wasn’t a case of a direct one for one replacement. A change in the way we think was required before we could adopt the new hotness. And when people started to understand that paradigm shift, all three technologies saw rapid adoption.

So in our thinking about the NBN pricing models, let’s not let ourselves be trapped into the ADSL paradigm of the past. Let’s go back to the drawing board and really consider what sort of usage models might be appropriate for an NBN age, and how we can best take advantage of this infrastructure. A country which would like to describe itself as ‘innovative’ can surely do nothing less.”

In addition, I would point out that the speed tier issue that Baxter raises here has been raised repeatedly over the past several years.

For example, in March 2013, the ABC reported:

“NBN Co is offering five different speeds at different prices, which telecommunications consultant and former Telstra chief economist John de Ridder says is artificial because, once the network is built, it does not cost more to deliver 100 mbps over the NBN than it does the slower speeds. “They could offer the same speed, unlimited speed basically, to everybody but they choose to ration it out, charging more for higher speeds,” he said.”

These are not new issues — and Baxter is correct — they must be addressed if the NBN is to reach its full potential. But they will not be until those stewarding the NBN — both its executive and political masters — recognise that they are trapped within a historical paradigm that has little relevance in an NBN world.

Image credit: Steve Baxter


  1. I do agree with some of his points about speed and CVC charges but not the others – anyway, it’s good that high profile ppl like him are speaking out and causing ppl to focus on the NBN in general.

    • It all works well to have no speed teirs for FTTP.

      Pricing structure does need a change while they are doing alittle about it which is good. But where there heading of different prices for different isp not so good.

      FTTN not so much becuase the wide degree of difference in speed. As with the current ADSL paying for in up to 24Mbps and getting 1Mbps service.

  2. I don’t necessarily think speed tiers are a good or bad thing however my one issue with the proper NBN FttP rollout was the inclusion of the 12/1mbps fibre plan just because these speeds were available on fixed wireless and satellite.

    Fibre plans should have started at 25/10, 50/20 and 100/40 (with symmetrical plans also made available) I mentioned something similar many years ago. NBNco (now GimpCo) could at a later date easily then make the 100/40 plan the slowest and move everyone up two tiers by adding the faster speeds (250/100, 500/200 & 1000/400 etc)

    Of course it has turned into a clusterfuck now but the only way this would have been possible was by building FttP, that is what the copper fanboy knuckle draggers will fail to mention. Their logic is tiers = bad therefore don’t build FttP, yeah NBNco (now GimpCo) could have dropped speed tiers completely (imo I think this would have happened naturally anyway somewhere down the line) and offer 1gbps symmetrical for all but it’s impossible to do if the network doesn’t exist in the first place.

    Enjoy the mediocrity and inflexibility of the FttN patchwork WITH speed tiers morons!

    • Just admit you are wrong and the speed tiers are the biggest single reason for MTM. For 8 years I’ve been saying that speed tiers are wrong because it blocks all the innovation.

      The fact that 79% on fibre have chosen 25Mbps or slower should have been ample evidence of this.

      • And yet with your no speed teirs rhetoric on FTTN you are imposing speed teirs on location and quality of copper.

        • Jason in the future if this MM responds to me please do not interject. I’ve already told him not to address me on Delimiter or any other forum until he admits he was wrong. No one else should waste time with this idiocy until he does.

        • Jason, MTM effectively imposes its *own* speed tiers. Usually around 25 Mbps over good copper, and possibly up to 50Mbps over new copper, IF you are close to the node. Heaven help those who have rotting copper; they either get it replaced with new copper (huh???) at exorbitant and unnecessary extra expense ($640 million at last estimate) and get UP to 50 Mbps maximum, or they put up with the same flaky access they had with ADSL, with the SAME speed limits. In the latter case, it is simply supremely stupid to spend vast amounts of money to provide them with what they already have!

          • You must be new here Robert.

            I’m not interested in having a debate with someone that uses logical fallacies, that moves goal posts when their idiocy is proven wrong.

            I’m not interested in having a debate with someone that has the attention span of a dust mite that can’t even remember let alone acknowledge their own contradictory arguments.

            I’m not interested in having a debate with someone whose pea brain cannot read the simplest of graphs properly or comprehend information in a corporate plan.

            I’m not interested in having a debate with someone who is an insufferable repetitive bore, that tries to divert every NBN topic on multiple websites to the same worn out and debunked argument.

            If you really want to entertain a MM please don’t let me stop you though.

      • Just admit you are wrong and the speed tiers are the biggest single reason for MTM. For 8 years I’ve been saying that speed tiers are wrong because it blocks all the innovation.

        If you cast your mind back a few years Mathew, I even agreed with you back then (about one speed and volume charging being a good idea). There were many heated comment threads over it :o)

        Unfortunately, neither of the major parties seem disposed to support it though :o(

  3. I believe that speed & the amount you can download were bought in so their can be different price tiers (some people either don’t use or can’t afford it). I understand that an “all you can eat” NBN would be great (with unlimited speed & data) but I can also see why we have different tiers.. Maybe an idea would be to just simplify things & have a few different simplified plans to suit everyone..

    • RSP’s could still cap the data used to control their costs (ie the international transits).

      Its basically the bad old days of T$ and ADSL. They capped speeds artificially on a network which then and today is now is capable of an up to 24Mbps service and RSP manage just fine!

    • The problem with speed tiers is that you cannot adjust up/down for your requirements (e.g. 100Mbps for a medical consultation) but if you have a budget then with data you can be careful in the first three weeks of the plan and be more relaxed in the last week.

  4. Totally agree with all points raised – anybody who wants to argue about nbn should read this and understand it. There is considerably more to nbn than just a fibre vs copper argument without addressing those items it will never deliver on what’s possible.

  5. Whilst flat charging is fine for FTTP it is very unfair for those forced to use FTTN – some of whom will only be able to get say 25Mbps where others will receive the full 100Mbps – at least speed tiers help cushion that blow (just like I recommend people on congested rims find the cheapest provider – won’t make the speed any faster but at least you will end up paying less for an inferior service).

    Just imagine if 250g of a product cost the same as 1KG (and you only had room for 250g!) or a tankful of petrol cost the same regardless of size of tank (in which case we should all go out and purchase the biggest V8 we can). Thankfully neither of these is the case – we pay for what we get. So why pay for 100Mbps when because of idiotic Government decisions you can only get 25Mbps? If you could get 100Mbps and chose not to – well that is your right – but to be forced not to and yet still pay is neither fair nor equitable.

    Scrap the copper and scrap tiers – they are interrelated.

    • If we could ditch FTTN for FTTdp, we would have a network much more capable of fulfilling Steve’s desire, while still retaining some of the copper (fulfilling the Noambition’s desire), and also still have an up-gradable path to FTTP (partially fulfilling the Labor desire, but fulfilling our desire for a network that works). It wouldn’t help anyone stranded on FTTN or HFC, but once FTTdp is out there, there would be less reason to not upgrade them to FTTdp.

      This would also give us a better reason to have hosted servers here, and give more reasons for why companies like Facebook, Blizzard, Netflix, etc should consider us as server hosts… (and thereby reduce our dependency on external connections… note I said reduce, not eradicate…)

    • “Scrap the copper and scrap tiers – they are interrelated”

      They are not. The tiers exist on Fixed Wireless – as well as Satellite.

      Tiers exist so the government could provide a direct comparison from Telstra ADSL Resale to NBN – no matter what tech was used – and the CVC usage component is a relic from this type of design.

      The thing is – all the carriers who built their own networks already knew that this was a bad idea, but did little to prevent it. Build a DSLAM network in “70 POIs” and you get better economic value out of $10million investment than you do with NBN at say, just 20 POIs. Half of your “Investment” with the NBN goes into Operational Costs (CVC) – which will not allow for the amount of bandwidth you could deliver exchange-to-exchange.

      Your argument to scrap the tiers is a good one – but you need to be prepared for FTTP costs to be higher than FTTN, etc.

    • If Labor hadn’t built a financial model with speed tiers then FTTN would never have been a viable alternative. If the suburb next door has 1Gbps but your copper is only capable of 40Mbps then it is distinctly unfair. But if 79% of people are choosing 25Mbps then it doesn’t seem that unfair.

      • And yet when I asked you the same question with your FTTN no speed teirs rhetoric. Your answer was life isn’t fair.

  6. “They could offer the same speed, unlimited speed basically, to everybody but they choose to ration it out, charging more for higher speeds,” he said.”

    That is only true if you have spent the money to allow for your user base to utilise this max bandwidth at build time, allowing for the possibility for 100 Mbps (or whatever maximum you could put on it really) universally across the network. Historically, providers haven’t, Telstra’s latest network outages for their mobiles proved that rather effectively, as the same capacity planning principle applies to the mobile user base too. Providers count on not everybody using maximum bandwidth at once …. until … they do. Then it’s “Oopsie”.

    Its not economically feasible to spend the amount of money on both cable and equipment to allow for this with no impact to prices. A demonstration of this is the HFC Cable today. Why can’t everyone on a single run all get 100 Mbps? They can, if the provider spent the money to provision it for them … but … they haven’t. Unless of course you jack up the prices to get your ROI for it to account for more cables being needed thanks to smaller ratio splits and upgraded switching gear close to the end point, and upgraded routing/cabling deeper into the network depending on what the provider hosts locally and what gets forwarded elsewhere.

    Now switch those issues to the NBN, and you have the same situation (although less routing, because they’re a wholesale switching provider). Money has to be spent to obtain maximum speeds for everyone … and I can’t believe an economist, let alone Telstra’s Chief Economist … doesn’t appear to understand that.

    • You provide a good argument why GPON, which is like a Party-Line from the PSTN days, results in a regulatory mess. By selling it to the public as 1 GE, there is an overpromise based on what it *could* do – but the reality is in a regulatory basis, 1:1 splits are around 80Mbits each.

      80 Mbits, today, 1:1 to end users would be the result and provides a predictable build and investment base, without the need for “CVC” to provide ongoing usage revenue. I’m not suggesting this as a solution – rather providing a prospective.

      • A guaranteed 84Mbps for a service touted as 100/40 assuming everyone’s using 100% all the time isn’t exactly a bad deal!

        To accommodate the full 1Gb its just the end points down the line that need upgrading to account for the bandwidth (because that’s 2.5Gbps split between 32 … what if they were using NG PON2 @40Gpbs etc).

  7. I have posted this on linkedin, but thought it would be useful to share part of the posting here also:

    The CVC Construct provides the government an effective policy lever – and the fact you can change the cost directly impacts on its usage, is intentional and deliberate.

    There has been regulatory failure in the consumer and small business telecommunications markets – because the honest truth is, few of us are prepared to work in some of the lowest margin industries where you are expected to provide excellent service to consumers – against the forces of investment decisions made by carriers and governments alike.

    In the banking sector the Reserve Bank provides wholesale funding to the Big Four – although here they can also use “toll bypass” to obtain funding from overseas. The Government has effective oversight and sway on the costs of funding debt – to ensure it does not get out of control, etc.

    CVC through its cost only makes sense to purchase through aggregators who have big scale to reduce the marginal costs. This in effect reduces retail service providers to resellers – with the reduced investment, by investors, into retail service providers.

    The end result is policy designed for better government oversight and control in an this industry (The Digital Economy Tax is what I called it) – working against the interests of the consumer as well as the businesses operating it.

    – In Short, no matter what is rolled out, FTTN, MTM, FTTP, FTTdp, or Satellite, the construct of required CVC to pay off the access-network build has locked the entire nation of ISPs into retail pricing reflecting 2010 Internet Services – and there will be no innovation with something like that.

  8. The Gizmodo reference [11] in para 11 of Baxter’s LinkedIn article requires a hyphen/minus between the average and theoretical, so: http://www.gizmodo.com.au/2014/07/average-theoretical-speed-fttn-nbn-46mbps/

    I do like Baxter’s innovation, I wish LinkedIn could be as bright: it seems my K-Meleon browser is not supported, and nor is my Opera 12.17. However, it opens very happily in IE11 and fails utterly to complain that I should be a registered user if I want more than one look. Unlike K-M, where it wants me to register, even if the browser is “unsupported”. Hmmm. I just changed my User agent (Browser sniffing is dead. Move on. The nature of Son Gokū is… Irrepressible!!!!) and it let me in again. But K-M is still unsupported… Never mind. I don’t use Social Media anyway, it’s a waste of technology.

  9. Speed tiers, agree, disagree, meh. It’s just one way of proportioning prices to have those who benefit most pay the larger share and not penalize those that would be happy enough with a lower speed,

    • Darren, with most long run utilities (20years+) the end-user pricing is determined by the long-run actual costs, and not by the up front investment required – otherwise no one would ever use it. There may be a small hump at the start – but, most utilities actually compete with other networks – electricity and gas for instance – and this puts a lid on early over-recovery.

      International cables are done the same way – you do spot pricing (12 month term) and get international bandwidth, or buy an IRU for 15 years and the longer term lower prices that come with such an investment.

      There is no reason for the NBN to make services like Netflix, the entire reason for many to use the NBN today, uneconomic due to price penalty – rather they should be aligning revenue to actual use. This is something the power companies do, with peak and off peak tariffs – its about the model for effective use.

      Imagine if a new power plant was commissioned, and because it cost $1billion, for the next 2 years everyone’s power bill went up by 50c per kw/h. Its lunacy.


        • The cost of building the network is a fixed cost, not a variable one – and the cost of the GPON modem and OLT is the same no matter what speed you select.

          Lowering the line speed as well as charging for usage is a double whammy – and prevents a very simple and efficient use of the network (offpeak updates at line speed while the network is quiet).

          If your limited to 12/1 because of cost, and you have usage capacity of a low cost, despite the economic position of a 100/40 port with 25GB push updates at 3AM in the morning being lower on the network than otherwise.

          Its very very broken and must be changed.

  10. Technically, Stephen is quite correct. The speed tiers are an artificial construct. However what he overlooks is the ‘sunk’ costs in building the network are real. So if you have a single max speed tier then everyone pays a higher price to cover construction costs. If you have 4 tiers then many people can get access cheaply while a few pay much more for faster access.

    • Precisely – at the beginning the majority of revenue is derived from those who require, value, and have the capacity to pay for premium services. 30% of customers carrying 75% of the costs, or something like that (I forget).

      But once you’ve paid down the debt on CAPEX, you only have to cover OPEX and maybe some additional revenue to cover further upgrades. You could pretty much set the cost of access as the lowest tier and just remove the tiers at that point – everyone gets full speed for the same low cost.

      But there are a few problems with that. First of all, the capitalists won’t like it – you’re going to have Liberals trying to offload it into the private sector, calling it a tremendous waste of potential income to the government or ‘economic stimulus to mum and dad shareholders of private industry’ (read: profit making potential for my rich investor mates).

      But secondly, you can’t make the cost of access the same for everyone – why should the disabled housebound pensioner have the pay the same as the tech savvy millionaire? For a service they barely use? You want one-size-fits-all? Then it has to be free, or it disadvantages low income people. Free is stupid, though (for everyone I mean – free for first tier might actually be a good idea) – it would be easy enough to pay the running costs of a national fibre network where access remained extremely cheap. But I do believe that those who value and can make use of higher performance should pay more than those who will use it substantially less. That way business and the rich still do the heavy lifting to bear the cost burden in a world where stuff like running and maintaining a network will actually cost money. Or is the argument that businesses and the rich shouldn’t have to pay a cent more than the poor and the infirm? ‘Cause that’s a bit #@&£ed up…

      • 30% of customers carrying 75% of the costs, or something like that (I forget).

        Indeed. If you take the proper NBN Corporate Plans as gospel from 2020 onwards it projected that the top tiers available (100/40 to 500/200) would raise the most revenue with 36% of customers on these connections. Revenue is about 50/50 at this point on the graph though. In 2028 the top tiers (100/40 to 1000/400) would raise 80% of the revenue with 58% on these connections.

      • The intention of Labor’s NBN funding model was to have data form an increasing amount revenue to well over 50%.

        > But secondly, you can’t make the cost of access the same for everyone – why should the disabled housebound pensioner have the pay the same as the tech savvy millionaire?

        If you compare other utilities then everyone does pay the same supply charge. It is the consumption of the service (water, power, gas, etc.) that is the differentiator. The pensioner can choose to heat only one room and be careful with lighting etc. where as the millionaire may choose to heat the whole house.

        In the NBN world, the housebound pensioner will choose the times that she uses the internet for video conferencing, whereas the millionaire may choose to run a wall of screens streaming different scenic spots. The difference is with Labor’s plan the pensioner wouldn’t be able to video conference in HD because the 100Mbps is too costly.

        > But I do believe that those who value and can make use of higher performance should pay more than those who will use it substantially less.

        Totally agree. It is just you have chosen the wrong metric, speed, when you should be looking at data consumption.

        > Cause that’s a bit #@&£ed up…

        Yes, Labor’s plan that a pensioner couldn’t have a HD video conference once a week is a monumental failure.

        • You know what? Maybe you’re right – have tiered consumption, but make the performance the same for all… I still understand the rationale behind tiered performance during the initial phase, though – as the market transitions from a DSL world to an unlimited fibre one, having speed tiers provides an opportunity to bleed I mean fleece I mean derive the greatest income from those willing and able to pay, getting the construction cost paid down faster. Then transition to flat performance, tiered consumption.

      • “… where as the millionaire may choose to heat the whole house.” Under most utility supply systems the price tier rises with usage, not the speed of delivery. (This may not be true in Remote Outback Oz or The Central African Republic.) So the pensioner using only a small amount of unobtanium pays a low rate, whereas the squillionnaire wasting profligate amounts will pay (hopefully) exorbitant rates per unit. This works because the delivery systems are shareable, and completely (except as noted) standardised.

        Fortunately, under FTTP the delivery system is of infinite width, so an incorrect pricing assumption has been made. It is not the speed of delivery that needs pricing, but the amount. Under MTM the delivery system is of variable width like in Chad or Remote PNG, so the amount is irrelevant and the speed is vitally important. And the political colour of the catastrophe is murky brown, not pale pink or light sky-blue.

        The problem is that we don’t have a reliable “Flush” button.

        • Its more like utilities than you make out. Everyone pays the same for x amount (water/electricity) if someone uses +Y they pay a little extra at a higher rate for just that Y usage (as x is at a fixed amount) and if someone uses +z they pay through the nose for the rest.

          A fixed speed but quota driven system like we have for ADSL operates like that. The main difference is with the internet your estimating your usage upfront (and potentially rationing your usage).

  11. I found the whole piece a rather odd.
    Pricing structures can be quickly changed, while what nbn is actually building will be with us for a long time, yet he effectively dismisses concerns about which technologies are being used.
    He dismisses concerns about Telstras behavior but later points out that Telstra severely under invested in maintenance of the copper access network.
    The analogy with roads doesn’t make much sense – heavy users do pay more for roads (try registering a truck), we increasingly pay per use for roads (via tolls), roads are virtually entirely publicly owned but broadband infrastructure is owned by a variety of people, and there is no obvious reason why we should pay for roads and broadband infrastructure in the same way anyway.
    He starts by objecting fiercely to the massive government intervention that the nbn is, but then argues for even more government intervention to make it better.
    He fails to address any of the obvious problems with his proposal – if it all becomes directly taxpayer funded, what happens to privately owned networks e.g. non-nbn FTTB ? What happens in the competitive backhaul market ? How will the government raise the money ? Higher taxes ? On who ?

    In general, he appears to suffer from a common problem among smart people – the assumption that everyone else is an idiot. Broadband infrastructure is mostly – but not entirely – a natural monopoly and it is a difficult area for governments around the world.

    • > Pricing structures can be quickly changed

      WRONG. Establishing the pricing structure too 2 years and required ACCC approval. Changing the pricing structure on the NBN would be even more difficult now as RSPs have established business models based on that pricing structure and the people who would be worse off would complain bitterly.

    • “… he appears to suffer from a common problem among smart people – the assumption that everyone else is an idiot.

      We-e-e-ellll, lesseee… SE Network Access. PIPE Networks. $373 million. ‘Shark’ on Ten’s Shark Tank.

      Aaaahhh, who’s the idiot here?

  12. “Changing the pricing structure on the NBN would be even more difficult now as RSPs have established business models based on that pricing structure and the people who would be worse off would complain bitterly.”

    I have played with product pricing in a telco world for over 10 years now – you are wrong.

    The “Established business models” are 2010 based internet access plans, when we live in 2016 where burstable traffic is a far better concept.

    You have power connection to your house – say it is a 30 AMP connection. There is plenty of capacity in the grid – but because you are just a home owner, you can only afford 5 AMP. You want to do some cooking in your house for 1 hour, which is going to use a lot of power – but it wont work at all until you upgrade your service plan with the electricity company.

    Its crazy – it prevents the uptake of the most important reasons for using electricity.

    There is no such concept in the “NBN World” – so because there is no Burst Traffic you get congestion.

    Even Frame Relay with its pricing models supported burst above CIR – business providers had little issue letting people download during the evenings.

    The pricing model is preventing effective use of the resource – its not the revenue we are talking about (which needs to be collected) but what ISPs get for their money – no matter how much they spend they do not get a technical solution to “the Netflix effect”

  13. Yes but he keeps quoting labors nbn to cost another $40b for tax payers… kind of stopped listening to him after that

    • To be fair, a full rollout of FTTP from today onwards would cost in that ballpark. Consider the most recent ‘official’ figures we have come from CP16 – with MTM costing $46-56b and their estimation for a FTTP rollout started today being $76-86b – that’s $20-40b right there.

      Let’s ignore the Coalitions tendency for fudging figures (in favour of MTM and out of favour for FTTP) and let’s ignore that Hockey stated we’re spending $70b on MTM for the sake of this articles’ figures.

  14. Lowest speed tier today would be interim satellite wireless with 6/ 1 Mbps with 50 GB quota, and capped number of premises. (32K premises in service, out of demand for 360K to 400K in premises, ex airline Wi-Fi.)
    Speed limiting of fixed terrestrial 4G wireless to 50/ 5 to 20 Mbps.
    Sovereign risk has meant drying up of investment in wired broadband access, as evidenced by lack of available ports, or lack of speed if on DSL far from an exchange.
    Weird, because Netflix may have arrived downunder in 2015, the WWW goes back to the year the Berlin Wall came down.
    Versailles on Lake Blwxyz Griffin repressive democracy based on the Washminster-style money/ pollyTICs/ media spin cycle has much to answer for.
    Netflix Taz, OzLog, nbn (CVC, as they just follow the money, 1M premises activated out of double that passed over three electoral terms)/ NBN, if no GAFW. Some action on mobile blackspots.
    Nbn MTM mk3 of 2013, NBN FTTP mk2 of 2009, cancelled Opel Networks’ DSL/ WiMAX of 2007, NBN FTTN mk1 of 2007, no Telstra FTTN of 2005, privatising Telecom/ OTC, offloading Aussat …
    Even then no DOCSIS 3.1 for HFC until 2017 onwards?
    FTTDp/ G.Fast by ?
    10G NG PON2 by ?
    There is a reason for OECD policy advise covering regulatory reform, competition for infrastructure -rather than PMG mk2 – and services, besides neutrality of technology.

  15. Perhaps I am silly..
    But isn’t it all funded by the tax payers?
    So?….. All companies charging are just doing that?
    Is just a company charging what they wish?

  16. If I’m reading his post right, he’s actually calling for both the AVC and CVC charges to be dropped and move the NBN back to “on budget” and the cost of building it goes to the taxpayer?

    If there is any cost recovery, how then, does everyone get charged? Flat fee for a connection? How does the network then cope when a bunch of “Tommy Torrents” saturate it?

    His road analogy doesn’t quite fit either. You do get charged for going faster than 100Kph (quite a lot). Heavy users are charged more (trucks, trailers, etc). I get what he’s trying to say, but I guess I don’t agree…pretty well any utility you care to name is based on volume pricing.

    And the NBN should be a utility. As such something along the lines of water would be a better model/analogy, everyone gets the same sized pipe into their place, and you just pay for the water you use. There are no “speed tiers” for domestic water, just volume charges.

    And he complains about the NBN being a monopoly, but offers no alternative. We’ve discussed this before on Delimiter (baby bell problems from a split up scenario, Telstra style issues with privatisation, etc), and all the alternatives have at least as many issues.

    If the NBN “has” to be sold, one idea I haven’t seen floated is nbn™ becoming something like a co-op, where all the RSP’s own a share of it and have a member on the board. The value of a “share” would need to be carefully worked out so the big players can’t game it, but this would help ensure they can get sensible outcomes at least.

    But then, I still don’t see the NBN staying a government controlled GBE as a bad thing. All the other privatisations have been disasters for consumers, and harmful to Australian society generally.

    • I agree the NBN should be a Utility and imo it should also be a monopoly … just wholesale only as originally planned.

      GongGav pointed out that removing the speed tiers and having consumers paying for data usage only is consistent with the major utility models, just with the Data consumption paid for up front instead of post usage.

      This would be imo the ideal model.

  17. Most interesting and straight to the point, using a big stick, without beating around the bush!

    His problem is, that he is talking to a group of conservative mononeuron luddites, who view technology and change as their absolute enemy. Sadly, as we all know the current batch conservative luddites residing in power in Canberra today, are literally incapable of thinking outside their collective head in posterior delusional view of the world.

    Back in the real world of NBN users. The NBN user select speed is purely based on relative costs of the current head in posterior plans sold by the mononeurons in marketing at the telco’s.

    According to the latest data supplied by the telco’s.

    A/ Tier one 12/1Mbps 15.5%

    B/ Tier two 25/5Mbps 71%

    C/ Tier three 50/20Mbps 4.7%

    D/ Tier four 100/40Mbps 8.7%

    Remember the greater profits are earned by the telco’s from under used user data capacity. This means they can completely oversell their bandwidth several times over US Comcast style! All the while, knowing their customers will not be effectively using their allocated bandwidth by a very large margin.

    You pay for what get and get what you pay for! Buy cheap, get cheap!

  18. NBNCo should never have tried to dictate to RSP’s the retail product offering, it should always have been here is your fibre, we’ll charge you $XX per customer per month, go nuts. Then we could have really seen some innovation, it’s not too late to do this now.

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