iiNet warns NBN circuits too expensive in the Netflix era

iiNet reckons the runaway success of Netflix in Australia is going to put the National Broadband Network pricing model under pressure. The problem is that the prices retailers pay the network company nbnTM is heavily influenced by download volumes. Backhaul from nbnTM points of interconnect back to a retail service provider ( …

[mathew42]

Fast speeds or high quotas?

The NBN pricing model is a compromise between charging based on speed and data. I would argue that it is speed that will deliver the benefits not higher quotas with slower speeds.

NBNCo require steep rises in ARPU to meet the desired ROI. If iiNet want to see cheaper CVC then AVC will need to rise, suppressing the take-up of higher speeds. Extrapolating from the NBNCo Corporate Plan, the price of CVC is forecast to fall by 2.5 times, while the average data usage grows by 18 times = growth in revenue from CVC of 720% when accounting for price falls.

As of February 26th, 38% on fibre have connected at 12Mbps while a further 38% have connected at 25Mbps. Hardly a justification for FTTP.

[Neoc]

Re: Fast speeds or high quotas?

Two reasons I do not connect to the NBN:

1) For some reason, even though I am less than 10km from the CBD nbnCo has deemed that I will not be getting service in the foreseeable future; and even if it did...

2) ...Under FTTN I will still be using the same crappy, rain-affected Telstra copper for the last (and crucial) kilometre.

FTTN is a joke. You want an analogy: it's like replacing someone's arm with a cybernetic version - the new arm's faster, it's stronger, it can lift a tonne... pity the body it's attached to can't keep up and rips itself apart trying to keep up.

[Anonymous Coward]

Re: Fast speeds or high quotas?

Solution FTTN + installing new discarded shopping bags in Telstra pits for improved rain/water resistance?

[Jasonk]

Re: Fast speeds or high quotas?

Currently NBN is well above the ARPU there where expecting. Already show your flawed argument.

As of February 26th, 38% on fibre have connected at 12Mbps while a further 38% have connected at 25Mbps. Hardly a justification for FTTP.

You also forgot the 19% on the 100/40 that pays more than those combined.

Considering that 12/1 cost $26 and 100/40 cost $38. Now Telstra wanted to charge $35 to keep the copper running. NBN won't have a choice to up the price just to keep it all running not to cut price of CVC but just to keep it running.

Or better yet there was 3 million faults with BT copper in 2012 great news for copper.

[mathew42]

Re: Fast speeds or high quotas?

> You also forgot the 19% on the 100/40 that pays more than those combined.

I'm curious as to how you arrive at this. Assuming 100 customers The AVC charges are as follows:

12Mbps = $24 * 38% = $912

25Mbps = $27 * 38% = $1026

100Mbps = $38 * 24% = $912 (best case as there will be some 50Mbps customers)

> Now Telstra wanted to charge $35 to keep the copper running.

Telstra's ambit claims for the costs of running the copper network are considered by most to be inflated and the ACCC regularly determines a lower cost.

[Jasonk]

Re: Fast speeds or high quotas?

Since it cost NBN to same to deliver 12/1 or 100/40 I will help your math a bit.

Let say makes a profit of $2 on the 12/1 $24 price to help pay back the loan.

12Mbps = $24 * 38% = $912 Profit of $2 = $76

25Mbps = $27 * 38% = $1026 Profit of $5 = $190

100Mbps = $38 * 24% = $912 Profit of $14 = $336

Hope that clears it up your math Mathew42

[mathew42]

Re: Fast speeds or high quotas?

> Let say makes a profit of $2 on the 12/1 $24 price to help pay back the loan.

NBNCo ARPU needs to approach $100 for the 7% ROI to be reached, there isn't any profit to be made on AVC at 100Mbps or less. CVC is where the profit is to be made. I consider this fair and reasonable as it allocates costs based on who is using the system and lower AVC encourages higher take-up. Whereas if the AVC is too high then people will simply opt for 4G.

[Jasonk]

Re: Fast speeds or high quotas?

$85 billion = 7.1% IRR on $30.4 billion over 25 years is $54 billion, plus repayment of capital.

So based on 12mil premises which is about $24 a month.

[mathew42]

Re: Fast speeds or high quotas?

> So based on 12mil premises which is about $24 a month.

Except that you didn't include operating costs (e.g. maintenance, NBNCo's bloated bureaucracy, interest payments, etc.).

[Mark 65]

Re: Fast speeds or high quotas?

Whereas if the AVC is too high then people will simply opt for 4G.

Yeah, because 4G works really well for high speed data. Sure, on occasion you can get good speeds if you are near a tower with good backhaul and there aren't a lot of other devices connected to it. Raise the uptake and that soon goes to shit.

[Jasonk]

Re: Fast speeds or high quotas?

Or better yet last year mobiles counted for only 10% of the data in Australia.

[Jasonk]

Re: Fast speeds or high quotas?

Well Mathew the fiber pipe to the node is only 2Gbps so on a fully laden node of 394 that's only 5Mbps in speed even if the half at 192 it's only 10Mbps. Does help with the CVC when they can't supply faster speeds so they can consume more data.

[AnthonyP69]

Re: Fast speeds or high quotas?

Mathew42,

I wouldn't call 38% on 12Mbps and only another 38% on 25Mbps fail for justification of FTTP. Most ADSL connections would be luck to get anywhere near the sustained network speeds of 12Mbps.

And then again there is another 24% on speeds higher than 25Mbps.

[mathew42]

Re: Fast speeds or high quotas?

> Most ADSL connections would be luck to get anywhere near the sustained network speeds of 12Mbps.

Actually the only known reliable data from iiNet / Internode published in 2008 showed that for Sydney almost 50% of connections achieved 12Mbps. At the time it was used as evidence to explain that Labor's FTTN plan would deliver little benefit to half of the country. Sadly, Labor's FTTP plan predicted that 50% on fibre would connect at 12Mbps.

[Anonymous Coward]

Memo to Malcolm

Surely your masters (Murdoch and News Corpse) are satisfied with the mess you have made of the NBN.

No need to over-egg it.

[Tannin]

Entirely their own fault

Iinet have only themselves to blame. Their idiotic decision to offer Netfix downloads quote-free to all their customers is the problem here. You pay for (say) 60GB a month and you expect that 60GB to be delivered reliably and at a decent speed. Generally, in the past, it was. Now you are still paying for your 60GB but the Iinet service slows to an unreliable crawl anytime after about 4pm and all evening long. Why? Because Iinet is delivering massive amounts of streaming video and doesn't have the bandwidth to spare to provide basic service to its customers who want to do other things on the web.

If you use Netfix of course you take advantage of the free, unlimited downloads. Who wouldn't? And if you don't, you are stuck paying the same amount for a much worse service. Whatever brainless twit at Iinet decided to implement this compulsory cross-subsidy of movie watchers by everybody else on their network should be put out to pasture immediately, or just sentenced to endure the same slow, unreliable Internet service Iinet customers are now putting up with.

[mathew42]

Re: Entirely their own fault

> Iinet have only themselves to blame. Their idiotic decision to offer Netfix downloads quote-free to all their customers is the problem here.

Agreed. I wonder if it was part of the agreement for Netflix installing connections direct to their network.

> You pay for (say) 60GB a month and you expect that 60GB to be delivered reliably and at a decent speed.

Actually most people don't consume their entire quota and RSPs rely on this to make a profit.

[Mark 65]

Re: Entirely their own fault

QoS it.

[Wombling_Free]

Who knew media would be delivered digitally?

I mean really, who knew the NBN was going to be used for this? The government who planned it? I don't care which one; the current tuckfards or the arse-clowns before them.

I think the concept of email have *almost* crept into the heads of our Glorious Leaders; the concept of moving-picturemationology is still a bit beyond their grasp though.

Fail? It's Australian for everyday life.

[david 12]

Re: Who knew media would be delivered digitally?

Certainly no one on forums.whirlpool.net.au: I was deleted for trolling when I suggested that the main use of the NBN was going to be for entertainment, not "education, medicine and business".

[eldakka]

Re: Who knew media would be delivered digitally?

Providing entertainment is a business. Therefore using the NBN for entertainment == using the NBN for business.

Also, education, medicine and business can all also be entertainment. And education can also be business (businesses provide education). Medicine is also business. And so on.

The only accurate way to describe the usage of the NBN (or any network) is "for data communications".

[Tannin]

Half-past nine local time, and my Iinet connection is unusably slow. As usual.

I'd up-vote several posts above but I can't be bothered waiting 60 seconds each time for the page to reload. Sorry guys.

Since their idiotic Netfix deal, Iinet has become terrible - and this is nothing to do with local DSL problems or anything like that, I'm on HFC cable here which is technically the next best thing to pure fibre and perfectly capable of delivering high speed - indeed it has done just that these many years. The day Netfix hit . BAM!, it turned to carp, carp, carp.

[bep]

The world is different now

so everyone has to get used to it. Quoting February sign-up figures is particularly pointless in a post-Netflx world. There have been plenty of streaming services before but Netflix do it right and at a reasonable price. So now everything is different. Fibre to the Home wasn't intended to deal with today's demand, it was meant to deal with demand long into the future, which no one can predict except everyone seems confident that demand for data and speed will rise. Judging by the number of websites which insist on running videos the moment you connect, this trend seems likely to continue.