MyNetFone blasts Labor, Coalition for ignoring NBN congestion


news MNF Group (MyNetFone), the provider of hosted voice and data communications services, has hit out at both the Coalition Government and Labor, saying neither has addressed the “inadequacies” of the NBN’s commercial model in their election policies.

Both the Coalition and Labor, the group said, have ignored the NBN’s “flawed commercial model” which is based on a “high-cost usage charge model”.

“MNF believes this legacy model, which is seldom used elsewhere in the world, is causing congestion, instead of as promised, solving the problem,” MyNetFone said in a statement.

Jon Cleaver, MyNetFone’s Group Chief Commercial Officer, said: “Peak hour congestion has been around since the start of the Internet, however just as we thought this was going to be a thing of the past, it is instead going to get worse as you will be impacted not just by your neighbours, but your whole suburb.”

“At the same time this is happening, content has gone through the roof. Everyone is consuming data at the same time and so peak time is no longer just a few hours, but from 5-11pm as everyone is streaming a movie or sport,” he added.

According to Cleaver, Australia’s Internet network is currently working on the same principal as “cars on a highway in congested peak hour traffic”.

“The answer is not increasing the speed limit. That does not reduce the congestion issue. It is about having more lanes,” said the CCO.

“With the NBN, we have those lanes, but commercially they are not being made available. We have the pipes and have spent the money putting in the infrastructure, but we are asking end users to pay a per usage cost when we live in an unlimited world.”

MyNetFone said this “poor user experience” is likely to drive people away from the NBN to alternative providers.

“Given the NBN business model relies on reaching an unrealistic target of 80% of all Australian households having an active NBN service by 2020, to generate sufficient revenue to repay the investment of building the network, this huge future benefit may become a huge future deficit for future generations,” the company said.

Locally, the slow take-up of high-end NBN services has been linked to the company’s pricing structure, with figures such as Stephen Baxter — celebrated entrepreneur and co-founder of fibre telco PIPE Networks — stating their disbelief that the NBN company charged customers more for accessing higher speeds, rather than incentivising them to use the full capacity of the NBN network.

In short, many experts believe Australians would take up the higher NBN speeds in much greater numbers if the NBN company reworked its much-criticised wholesale pricing model.

The issue has also been linked to congestion issues, especially on the new wave of NBN technologies such as Fibre to the Node, with retail telcos such as Telstra and Optus not allocating sufficient backhaul capacity to customers, because of the NBN company’s per-usage model.

No political party has so far addressed these issues in their NBN policy platform.

Image credit: NBN company


  1. Where have we heard all this before?;-) Numbers shouted down.

    Cutting CVC destroys the financial model. Forecast 7.1% IRR still believed by many (actuals showing negative).

    Costs exploding, ARPU underperforming, and changing users habits (video not suitable for high contention ratios). The policy (all models) unravelling before their closed eyes.

    • “(actuals showing negative)” thanks to the LPA.
      “ARPU under performing” not until LPA got a hold of the reins.

      All those things you continually complain about yet the LPA haven’t addressed or fixed a single one of them in the last 3 years so terribly sad that is!

      “changing users habits” been happening for a while now (accelerated by local netflix launch) … old news though it makes you wonder what a policy of 25Mb’s for all was meant to achieve (not that that target has even been reached yet).

    • How about NBN taking some responsibility for loss of revenue. Look what TPG have done with FTTB – beat them to all the inner city buildings. TPG are now locking up customers on long term contracts and in a lot of buildings, there isn’t space for NBN to even deploy their gear now!

      Wouldn’t have been an issue if we had stuck with the original FTTP rollout.

      • How many buildings have TPG FTTB connected?

        Take a look at the numbers; the $20b “invested” will generate $~300m this year, making a operating loss (ex capex) of $2b!

        Do you seriously believe TPG is the cause of NBNCo’s financial problems?

        • They are part of it, and the CVC charges are another part (there may be more, but those are the obvious ones). TPG is direct competition to NBNCo in MDUs. If TPG gets there first, and hooks the customers in, NBNCo can’t do anything about it, therefore they lose money.

          With Optus, Telstra, et al, complaining about CVC charges, under purchasing CVC will remain until the CVC charges come down to a figure the RSPs are happy with (which may not happen in the near future.

          NBNCo needs to fight to regain a financially stable position, but they seem intent on just bludgeoning the RSPs into submission instead (which isn’t working)

        • Over 1400 buildings, and it’s not just TPG. Vocus I’m sure will be doing the same shortly, and they will be able to uncut NBN’s pricing by around $20-$30 per month, so why should I sign up with NBN with congested CVC when I could TPG/Vocus FTTB.

  2. Cutting CVC destroys the financial model. Forecast 7.1% IRR still believed by many (actuals showing negative).

    You do realise that if you make that criticism of Labor, then the LNP is guilty of the same thing with far worse [copper] technology?

    What’s the use? You know it all don’t you?

    • They’re not guilty of the same thing, though still guilty (never denied). The hit to taxpayers will be tens of billions, however tens of billions less than the original FTTH. The policy is a disaster.

    • You do realise that if you make that criticism of Labor

      Of course he does, that’s his main point, he only takes token pokes at the LPA to try to appear “balanced”.

  3. I’ve been saying this since the original plan was tabled:

    It is entirely unrealistic for the government to think that this project can be completed with a viable ROI investment without causing either congestion issues (due to not enough CVC purchased by ISPs) or making the prices to expensive for the average Australian.

    The correct thing here is to “write off” some of the investment as government subsidy, thus allowing the pricing of CVC to go down, while keeping the conservative yet achievable ROI of 7ish%. Hell, if we did this, it might even keep 10-second-Mathew happy because the number of people who can afford 1Gbps will magically jump upwards from the current 1% in 2025.

    But both parties would rather swing mud about the cost of the product “to taxpayers”, both conveniently ignoring that this is supposed to be a government investment, not an expense. Hell if they correctly referred to it as an investment, maybe people would be more comfortable with the idea of near universal FTTP which is perceived to be more expensive to the average joe, since the idea is an investment will be paid back over time.

  4. The fundamental issue is lack of competition. There is no incentive for NBN to ensure there are no congestion issues in their portion of the network because all competition is eliminated.

    The other problem from a consumer perspective is lack of transparency. When performance or reliability sucks they have no idea whether it’s NBN or ISP portion of the network. Are people are expected to battle through their ISP support desk? It will be pretty easy for unscrupulous ISP’s to just blame the NBN in order to retain the customer.

    • No Greg, this isn’t the case. While yes, this could be a problem, the rather comprehensive SLAs that ISPs enter into makes nbnco liable financially for congestion at the back end. It’s a stick, yes, but a pretty effective one that’s been proven to work with lots of bit-stream service providers across the world.

      The problem is that the costs for providers, like MyNetPhone, to eliminate congestion for users at the retail level is too high. Meaning that if you want to provide a low or contention free service you need to charge through the nose for it, and customers are already paying to much for Internet in Australia in general.

      Consumer awareness is also a minor problem, if you offer a 100Mbps service with half the contention ratio, most customers won’t understand why this costs them an extra $30/m and will think you’re overcharging them.

      The price of using the nbnco AVC and CVC should be so low that it is considered negligible, but just high enough that the fees nbnco collect are enough to refresh and upgrade equipment to keep up with demand. However nbnco has the burden of paying off tens of billions of dollars in debt as well, pushing their pricing off.

      As I said in my post above, the solution is simple: a portion of the debt nbnco incurs should be written off by the government, reducing the amount nbnco has to repay from the order of $50-60 billion down to a more manageable amount ($30-40 billion).

      In short, the cause of this problem is the notion that both governments have brought into, that this project should make a profit. If it was able to make a profit, subsiding private industry would be a better way to achieve it!

      • Hi NightKhaos, thanks for the info. I hope the SLA’s work. As a consumer I guess I’m a little skeptical given the supposed telephone repair times guarantees versus the reality experienced by myself and my parents in different suburbs over the past decade.

        I don’t pretend to understand all the economic and pricing arguments, but I’d always paid Internode more money than I could get the “same” service elsewhere purely because of their reliability and performance. I assume most people won’t be the same. I always found it annoying that the only way to figure this stuff out was from Whirlpool forums rather than some useful (and published) metric.

        There seems to be a lot of ISP’s at the moment and I assume that will rationalise down significantly if they all have to provide so many links to POI’s plus the various NBN charges.

        • It has been said by quite a few experts that the concession of the ACCC to increase the PoIs from the internally proposed 14 to many hundred was a huge policy mistake.

          It increases the barrier to entry significantly. With 14 PoIs if a provider wants to provide 100Mbps services they need to order about 2.1Gbps of CVC backhaul for a nationwide launch.

          However, with many hundred that number increases to more like 15-20Gbps. This reduces the ability for small players to enter the market, reducing the number of national players to about half a dozen at most.

          Maybe that’s enough. I don’t know. What I do know is that once we have the physical Infrastructure sorted, we should be encouraging revision of the financials of the project.

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