[AusNOG] NBN Commsday Presentation

[Mark Newton]

I don’t believe the CVC is necessary at all if the value of the network is written down as you suggest.

The NBN needs to get NBN out of the business of charging by the megabit. There is no economic justification for that in a world where the marginal cost of a megabit is near zero. As long as the network generates enough revenue to cover its running costs and expansion, it makes no difference whether that revenue comes from megabit-based fees or access fees, so they might as well set the access fee at an adequate level and give everyone an easy life.

You proposed a $20-$30 billion write-down. That brings the value of the network down to about $20 billion.

If it’s the only fixed-line network in town, you can expect subscribers in about ten million premises after the non-NBN access networks are shut down.

If NBNco has 10 million services active, at (say) $30 per month wholesale, flat rate, then that’s $300 million per month in revenue, $3.6 billion per annum.

Pay a billion of that per annum back to the Government as a 5% return on capital.

That leaves $2.6 billion p.a. to run the network: $260 p.a. per service for O&M, upgrades, fault rectification, etc. In the same ballpark as what Telstra charges at retail rates, profitably, to accomplish the same thing for about the same number of voice services nationally. If NBN can’t run their network cheaper than Telstra’s retail rates, then they might as well pack up and go home.

So you'd end up with no CVC charge, and no differentiated speed tiers on the network edge. Wholesale $30 flat-rate per month for whatever the port can deliver. Simplifies provisioning, billing, marketing, service definition: NBNCo would have a service catalog which looked like one service per access technology, at one price. 

Deal with congestion by incrementally lighting up new wavelengths cheaply on the transmission networks they’ve already built, funded out of annual revenue. Australia isn’t growing fast enough to need massive new capital injections for upgrades after it’s built.

And ISPs would be in a world where they could profitably deliver entry-level 100 Mbps services for sub-$50 per month.

https://www.youtube.com/watch?v=jL2DH-nKBeA <https://www.youtube.com/watch?v=jL2DH-nKBeA>

Once the Government gets away from the notion that the NBN is supposed to make money, and turns it into a social investment, it becomes possible to cause the finances to make a modicum of sense.

   - mark




> On Apr 20, 2017, at 12:30 PM, Bevan Slattery <bevan at slattery.net.au> wrote:
> 
> Hi Mark,
> 
> What I'm saying/thinking is that if NBN Co. could provide a "safety net" from a backhaul/CVC standpoint that could make sense.
> 
> For example you don't want to make this EXCLUSIVE 14 PoI's.  What you could do is provide a CVC fee for accessing at the normal PoI but also say a Aggregated CVC fee (local/121 PoI CVC + say $3/mbps) for hauling the circuit back to the capital city.
> 
> This would:
> 
> (a) provide protection for those that have invested in backhaul
> (b) provide a path for ISP's to build critical mass before building out to a PoI (removing barriers)
> (c) allow providers who build scale to do PoI capacity backhaul deals where there is competing markets
> (d) allow potential backhaul investment when a backhaul provider can get enough business case up to support it
> (e) provides tax payers/NBN users great choice of ISP providers
> 
> It should be both BUT it should ABSOLUTELY NOT BE ONLY 14 PoI's. That would be a complete disaster.
> 
> Cheers
> 
> [b]
> 
> 
> On 18 April 2017 at 20:32, Mark Delany <g2x at juliet.emu.st <mailto:g2x at juliet.emu.st>> wrote:
> > Happy for feedback on agree/disagree.
> 
> Could you elaborate on your "Simple to fix..." slide?
> 
> Specifically what do you mean by "going back to the 14 state-based
> POIs or directly at the local 121 POIs"?
> 
> Pretty much every other part of your deck talks about the last mile
> and the economics of CVC and so on, but this part seems to refer to
> backhaul.
> 
> Are you trying to say that backhaul to the 121 POIs will never be
> competitive so NBNCo should backhaul to competitive places - namely
> the 14 state-based POIs?
> 
> 
> Mark.
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