[AusNOG] NBN: "i want a pony! but can I afford it"

[Paul Brooks]

On 15/08/2010 10:25 PM, Grahame Lynch wrote:
> Genuine question here
> If aggregation is such a possible and desirable outcome in the NBN 
> world why isn't it happening now with Band 3 exchanges? I accept the 
> economics of DSLAMs in band 3 are poor for individual access seekers 
> but presumably a wholesaler who aggregated demand could make a case 
> for Band 3 LSS deployments, especially given the complaints about TW. 
> To the best of my knowledge the last 4,500 of 5,000 ESAs remain 
> unsullied by competitive DSLAMs to this day....
A couple of excellent responses to this one - in summary it would 
appear  there aren't sufficient economies of scale even for an 
aggregator to make a positive return, given the per-line prices.

> Given the obvious opportunity for aggregation now and the reluctance 
> of anyone to bite the bull by the horns, what specific drivers will 
> encourage this to change when the implied "minimum bar" in terms of 
> "volume"  transit and backhaul requirements in regional Australia (ie 
> higher speeds, higher quotas) actually increase dramatically? (along 
> with implied access cost - $25-30 NBN entry price compared with $2.50 
> LSS price today).
> I can't actually see where the incentive lies for a smaller carrier to 
> stay in the market or to specifically go to regional Australia when 
> they don't now....and I am aware of the new Nextgen cable (is that the 
> solution???)

Grahame - there may not be sufficient drivers in some areas. Even if 
there are two competing backhaul carriers serving a given remote POI, 
there is no guarantee that either of them will price their capacity low 
enough for RSPs - or an aggregator - to make a positive return once that 
backhaul component is added to the NBN port charge and other charges. 
For some remote POIs, it is possible they'll build backhaul, and no RSP 
will come. That said, there is a marketing advantage for an RSP or an 
aggregator to claim 'complete national coverage' and service that area 
anyway, make a loss, and cross-subsidise it with the margin on other 
closer POIs with much higher volume and lower per-volume costs. There is 
also an argument for something similar to the USO - a subsidy for an RSP 
who steps up to serve such an area, to fill the gap between a nominal 
'reasonable' retail price and the higher actual cost to serve them - or 
a subsidy direct to an end-user to help defray having to pay a 
higher-than-mainstream retail price.

P.


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