Reply to post: Re: Chicken & Egg Problem

nbn tries to shift the conversation to future copper upgrades


Re: Chicken & Egg Problem

> lets assume that the price of CVC wouldn't change in a single tier mode and to offer a gigabit connection the AVC was at the 100mbit price if not more, and it'd be the only AVC available.

NBNCo require a fixed sum of money to build the network and maintain it. NBNCo delivering a return on investment is heavily dependant on ARPU rising to over $100/month, and the growth strategy is total CVC revenue increasing. If you read the NBNCo Corporate Plan, CVC pricing started $20Mbps/Month when the average data usage is 30GB/Month and over time will fall to $8Mbps/Month when the average data usage is 540GB/month. This means that while the price falls 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.

Currently AVC is sufficiently high that for low demand customers with a mobile it doesn't make financial sense. If AVC was reduced to a flat rate ($20/month) and data charges were increased (or even just left at the current pricing) then demand for connections would jump and people would download more simply because the faster speeds mean people download richer media. NBNCo might take a hit in the initial years, but the growth in data consumption would rapidly see this eclipsed.

> The early adopters are already on 100/40 and it isn't like that group are a single digit percentage.

At the current drop in 100Mbps users (down 3% in 12 months) the percentage may well fall below single digits based on the current trend. The source for the information is easy to find in the media release section of the NBNCo website in the "nbn Half Year Financial Results Presentation 2016" presentation.

> Letting ISP's have a full speed AVC and them manage like you propose hasn't worked well for ADSL

It has worked brilliantly compared with Telstra's model of charging for speed tiers and also having quotas. As with everything you do need to pay a little more for quality.

> Especially as the current FTTP GPON won't do a full 32 active 100 mbit connections without contention at the delivery level. (but hey at least it can be upgraded...)

GPON2.5 will support ~78Mbps with 32 users. If so much data was being downloaded, then NBNCo would be rolling in cash and the upgrade to GPON10 would be trivial to justify to the bean counters.

> Maybe if if instead of saying massive percentage of FTTP customers are connecting at slow speed x, we say all FTTP customers are gigabit capable. Does that whet your thirst for speeds?

I can tell you my car is capable of 350km/hr, but that is meaningless if the speed limit is 25km/hr. Continuing the car analogy, Labor's financial model is to build a freeway with toll charges based on the speed limit on the lane you select. The price for the 100x faster lane is only 4x the price but only a handful of drivers can justify the prices.

Labor's prediction is that in 2026 1% of customers will be connected at 1Gbps. Currently I'm not aware of RSPs offering a plan faster than 100Mbps, because it simply isn't financially viable.

> If you're saying it should be single speed for uniform pricing you're really saying the price should go up for those who don't need the same speeds, or do I misunderstand your thoughts on removing tiering?

I'm suggesting that AVC prices should be cut to a single speed tier and CVC prices should fall slightly slower than predicted in the NBNCo Corporate Plan.

If 79% of customers are connecting at 25Mbps or slower then the choice of technology doesn't make a perceptible difference. The small minority who want fast speeds have the option of moving to a FTTP area or fibre on demand.

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