[AusNOG] NBN and CVC

[Terry Manderson]

I don't often agree with Bevan - perhaps different perspectives in life. (single malt discussion) :)

But 3. and 4. is precisely why we (Australia) is here right now and it stings when a colleague who lives in San Fran just got a 1gig symmetrical for $50/month.

Is there a fix to the CVC issue? Well yes, but it will take a government who is capable of listening to folks in this industry who can read the auguries and then accept that the model instilled is flawed and put pressure on the ACCC to repeal the ruling. The government will have to cop it on the chin that if it's "nation building" the drive to treat it like a revenue raising exercise is broken.

Will that happen? I doubt it. Politicians huh? Since I was well aware that 5G was coming when this grand scheme was considered (I play in standards space) I was ranty about the idea then. Now, I think the 5G arbitrage price war will put the NBN to shame in both speed and customer uptake. And I can't wait.

Terry
 
 
> On 31 Jul 2017, at 9:25 AM, Bevan Slattery <bevan at slattery.net.au> wrote:
> 
> ***PERSONAL POST***
> 
> NBN Fast 5 facts
> 
> 1.  The NBN can be any two of the following.
> 
> - FAST
> - AFFORDABLE
> - HAVE THE MIRAGE OF GENERATING A COMMERCIAL RETURN
> 
> The Government is sticking to the "mirage" while RSP's are trying to make it affordable.  Therefore "fast" it ain't.
> 
> 2.  The potential penalty for providing affordable broadband to just 5 different users in competition with the NBN is more than importing either 2kg of Cocaine, 1.5kg of Heroin or 750kg of Meth into the country.  Yes - let that sink in for a minute.
> 
> 3.  The ACCC are ultimately responsible for this mess.  The ACCC were supposed to look after the consumer, but in their rush to appease (initially Labor) political masters they abandoned almost 20 years of infrastructure based competition philosophy, approved the Special Access Undertaking, approved the sale of both Telstra and Optus' HFC network to NBN Co, changed the 14 PoI's to 121 (instead of making both optional) and approved the creation of a new monopoly in what was a vibrant, competitive market.  Never in a developed economy can I recall such massive Government intervention blessed by an equally committed regular to destroy last mile competition in the telecommunications industry.  Rod Sims call "to sort this mess out" and threatening RSP's "to lawyer up" shows how the ACCC is not prepared to accept their culpability in failing all Australian's.  I'm sorry.  ACCC this mess is yours and threatening RSP's to try to eek out a usable network experience and put lipstick on the pricing model "pig" you approved is breathtaking.  The ACCC has shown how out of depth they are here and Rod Sims should accept his organisations failure to protect the consumer and resign.  It's time for a reshuffle at the ACCC who have demonstrated they are woefully inept and incapable of being independent.
> 
> 4.  It's all academic if the Government doesn't find a way to bring $30B on budget by the end of the year.  Government will become unelectable (my prediction earlier this year) and the NBN will not achieve critical mass (my prediction last year).  The growing frustration of users churning from ADSL/HFC realise that their NBN connection is more expensive and slower during peak times (my prediction in 2015).  TPG will launch a $30 all you can eat home 5G wifi base (similar to Telstra Nighthawk) that will start a 5G war with Optus, Vodafone and Telstra.  This will lead to a massive investment in 5G base stations/backhaul and will take away the bottom 20% of all NBN users - as well as the mobile/young/renters within first 24 months.
> 
> 5.  Having 1,000,000 screens on the NBN concurrently using Netflix UHD will cost $300m per month for CVC alone.  95th percentile won't work and bit type charging is better won't solve the problem.  The problem is the commercial return and keeping this investment 100% on balance sheet because at the end of the day the Government is forcing the people at NBN Co. to try to do the impossible - which is get massive market saturation (take up) of an expensive and inferior product (due to high cost).  NBN Co. is fighting the good fight, but with both hands tied behind their backs.  They need the write down to make this network sing.
> 
> Cheers
> 
> [b]
> 
> 
> Some background reading:
> 
> Slattery calls "bullshit" on NBN Economics (2010 and sadly my predictions are all pretty much bang on)
> http://www.zdnet.com/article/slattery-calls-bullshit-on-nbn-economics/
> 
> 2015 Commsday Presentation - Why the CVC is Evil & NBN will halve TPG, Telstra and Optus residential profit margins
> https://www.slideshare.net/CommsDay/cd-summit-2015-superloops-bevan-slattery?next_slideshow=1
> 
> 
> 2016 Commsday Prediction of 5G destroying current NBN Economics
> https://www.slideshare.net/CommsDay/commsday-summit-2016-superloops-bevan-slattery
> 
> 
> 2017 Commsday Presentation - Prediction Recap and ACCC is ultimately to blame - Let's help NBN Co. get what they need.
> https://www.slideshare.net/CommsDay/commsday-summit-2017-superloops-bevan-slattery
> 
> 
> 
> 2016 - Commsday Letter
> 
> Rod Simms – It’s time for you to go
> 
>  
> Sorry ­ I¹ve watched this from afar for too long and have really had enough.  It’s time to speak up.
> 
>  
> The ACCC has absolutely zero understanding as to the catastrophic effect of their decisions/endorsements of the NBN and the “ghosts of Christmas past” are now starting to come back to haunt them.  But instead of acknowledging their failure, they are trying to point that it is Government¹s fault or that the ISP’s are not being transparent about shaping traffic.  I’m sorry Rod and Co. but you are the ACCC and your absolute fundamental role is to protect consumers.  The ACCC had absolute power to stop, alter, fix the SAU, block the sale of fixed line infrastructure and even force price reductions in access charges.
> 
>  
> Rod Simms Chairman of the ACCC for the past five years, only this week said that
> 
> “privatisations are severely damaging the economy"
> 
> https://www.theguardian.com/australia-news/2016/jul/27/acccs-rod-sims-says-privatisations-severely-damaging-economy
> 
>  
> 
>  
> "He says governments have created private monopolies without sufficient
> 
> regulation to stop those monopolies overcharging users ­ and the public
> 
> knows it and has a right to be angry.”
> 
>  
> 2014 the same Rod Simms “argues the benefits of privatisation"
> 
> http://www.abc.net.au/news/2014-01-06/accc-chairman-sims-floats-privatisation-of-power-post/5185970
> 
>  
>  
> "The Australian Competition and Consumer Commission chairman Rod Sims says the root and branch review of competition policy by the Federal Government should be as broad as possible, as privatisation and more competitive markets offer the best possibility of productivity improvements. Mr Sims says, for a start, state governments should privatise energy companies, a move he believes will bring down electricity prices.
> 
>  
> 
> "When the private sector owns assets that does provide better incentives
> 
> for better performance," he told ABC's News Radio."
> 
>  
> As for the NBN the single largest monopoly currently operating in Australia - well it was completely created and reviewed under the ACCC¹s watch.  In fact the ACCC green lighted every single piece of price-fixing, monopoly creating, competition destroying piece of the puzzle, selling out almost 20 years infrastructure based competition to ensure that by 2020 Australian consumers will HAVE THE MOST EXPENSIVE BROADBAND SERVICE IN THE DEVELOPED WORLD.
> 
>  
> Think this is an exaggeration?  Ok.  Let¹s do the dance:
> 
>  
> 1.  ACCC created the PoI mess themselves
> 
> https://www.accc.gov.au/media-release/the-accc-publishes-the-list-of-points-of-interconnection-to-the-national-broadband-network
> 
>  
> -       ACCC decides to overturn the NBN’s proposed 14 PoI’s and establish 121 PoI¹s
> 
> -       Could have offered both with reduced CVC to collect from local FAN/PoI for significantly reduced CVC rate
> 
> -       Decided to push out to 121 only with no aggregation regardless of whether the PoI had competitive backhaul or not.
> 
> -       Did not seek to reduce the CVC rate to reflect there being no backhaul back to aggregated state based NBN PoI’s under the NBN proposal (Yes $20/Mbps still for the CVC)
> 
> -       reduced competition as only ISP’s with enough subscribers to each PoI can justify access (read Simon Hackett’s excellent presentations on this)
> 
>  
> 2.  ACCC approves Access and CVC costs
> 
> https://www.accc.gov.au/system/files/ACCC%20Final%20Decision%20on%20the%20Special%20Access%20Undertaking%20lodged%20by%20NBN%20Co%20on%2019%20November%202013.pdf
> 
> ACCC explicitly approved the entire mess including the two main costs
> 
> Access and CVC
> 
> -       ACCC approved $20mbps CVC charge;
> 
> -       Approved and endorsed the asymmetric product portfolio and pricing regime which are aligned to 2002 access technologies (ADSL)
> 
>  
>  
> 3.  ACCC was instrumental in dismantling any competition to the NBN
> 
> -       2012 ACCC approved the entire sale of Telstra¹s Copper and HFC network
> 
> -       to NBN Co. for $11B reducing competition
> 
> -       2012/2015 ACCC the entire sale of Optus’ HFC network to NBN Co. for
> 
> -       $800m reducing competition
> 
> -       ACCC therefore approved the ultimate removal of every existing ADSL/VDSL and HFC competitor from main capital cities (sorry Canberra)
> 
> -       ACCC therefore approved the removal of almost any competitive tension
> 
> -       for the NBN to change its completely flawed pricing model
> 
> -       ACCC declared new rates for Superfast Broadband services this week.
> 
> -       $27.50 access and $17.50/mbps for CVC charges.  So to get a 1000Mbps guaranteed service to a school would now cost more than $200,000/annum just in access/CVC charges.
> 
> -        
> 
> So now we have an ACCC that is asking providers to become “more transparent” as to how fast their broadband service is and how much they are throttling the service.  Really?  Are the ACCC that ridiculously out of touch and inept?  Well obviously - yes.
> 
>  
> So to help the ACCC I¹m going to help you with this.
> 
>  
> * All your customers have $60/month for a broadband service
> 
> * That¹s just over $54 EX gst (and a credit card charge)
> 
> * NBN Co charge $27 for a 25/5 tail
> 
> * that leaves ISP¹s with $27 to pay for:
> 
>  
> -       CVC
> 
> -       backhaul + NBN PoI interconnection/colo
> 
> -       national backhaul and international capacity
> 
> -       tech support
> 
> -       company overheads/costs/compliance
> 
> -       profit
> 
>  
> So assume the provider wants to make 10% profit on the service meaning $5.40 that leaves $21.60 for
> 
>  
> -       CVC
> 
> -       backhaul + NBN PoI interconnection/colo
> 
> -       national backhaul and international capacity
> 
> -       tech support
> 
> -       company overheads/costs/compliance
> 
>  
> So assume tech support is $5/sub/month and company overheads of $3/sub/month on average then that leaves $13.60/month for:
> 
>  
> -       CVC
> 
> -       backhaul + NBN PoI interconnection/colo
> 
> -       national backhaul and international capacity
> 
>  
> Assume national backhaul and international capacity is $5/mbps (assuming quite a lot of peering) and $1/mbps average for NBN PoI backhaul along with a CVC charge of is $17.50 then the average bandwidth cost per mbps delivered is $23.50 (majority CVC)
> 
>  
> So what you are left with is $13.60 worth of bandwidth/backhaul with an average cost of $23.50/Mbps. $13.60/month divided by $23.50/mbps/month = ~0.587Mbps average consumption or 170GB/month
> 
>  
> THIS IS THE REALITY OF THE ACCC¹s DECISION. EVERY WAY YOU CUT IT THE BEST AVERAGE DOWNLOAD SPEED ACROSS THE GROUP FOR A $60 USER ON THE NBN IS 0.580Mbps or 180GB per month
> 
>  
> There is only three strategies a user can get more than this:
> 
>  
> 1.     Pay more.  If you paid ten dollars extra ($70/month) you can get an extra average consumption of 0.38Mbps/month
> 
> 2.     Hope.  They need to hope/rely on users using less and there being no peaks (which is what traffic shaping is designed to help reduce)
> 
> 3.     Competition.  They can access an alternate provider with a better offering.  Like a HFC provider or another VDSL provider for them to access or to force the NBN to change their pricing
> 
>  
> Oh wait.  That¹s right the ACCC approved the removal of all those competitors.  So yeah.  Pay more or hope. Good luck with that.
> 
>  
> Time for the ACCC to accept its’ culpability and negligence in approving the worst example of anti-competitive, price fixed, monopoly infrastructure which in the next five years will deliver the Australian public the most expensive broadband in the developed world.  The manner in which the ACCC then has the audacity to ask ISP’s to be more transparent in their disclosure around bandwidth management shows the complete dislocation of the ACCC’s grip on the fundamental realities of the anti-competitive Frankenstein they have endorsed and approved.
> 
>  
> This would be my disclosure if I were a retail ISP:
> 
> “Because of the ACCC approving the NBN Special Access Undertaking and reducing your competitive options, the ACCC has endorsed the NBN monopoly rents on your service.  As a result your $60 broadband plan will not support a guaranteed single standard definition Netflix stream so we have had to deploy traffic shaping technology across the network so we can delay non-time sensitive/bandwidth insensitive traffic and reduce the quality of the Netflix stream to the point that it can now work during peak times and while you start to notice degradation, at the moment we can avoid you seeing hieroglyphics.  If the CVC fee was between $2-$5/mbps this would be less of an issue, but the ACCC believed it reasonable that the cost to stream data from a house next door to the NBN PoI 50 metres to the NBN PoI should be twice to three times as expensive as connecting the NBN PoI to stream data from a website hosted 20,000km on the other side of the planet.”
> 
>  
> Rod as Chairman of the ACCC needs to accept responsibility of the mess his organization has left for every Australian broadband consumer to endure for a generation.  Every way you look at this; Rod Simms - It’s time for you to go.
> 
> 
> On 30 July 2017 at 11:00, Matthew Moyle-Croft <mmc at mmc.com.au> wrote:
> Hi,
> I’m going to side step that entirely - I think it’s always interesting to look at other models, but at the moment we’ve got what we’ve got.
> 
> I did have some interesting responses - I think it’s pretty clear though that a p95 product for CVC would be popular and unlock a lot of options for ISPs.  It may mean a bit of a drop of revenue for NBN but not too much, but it’d definitely overcome a lot of the issues with congestion where ISPs can’t always keep up and/or predict some spikes.
> 
> MMC
> 
> > On 29 Jul 2017, at 4:19 pm, Mark Delany <g2x at juliet.emu.st> wrote:
> >
> >> Is buying the CVC in fixed amounts the right model?
> >
> > I've always wonder why it's been a speed-based system. It strikes me
> > that speed has always been a poor proxy for resources consumed and now
> > that model is just getting in the way.
> >
> > Would it be better and simpler to set the local-loop (LL) line speed
> > to the maximum the tech allows and charge on bits delivered to/from
> > POI to LL along with a flat rate for LL upkeep?
> >
> > Just like other utilities such as electricity and water.
> >
> > It's been shown that most people don't generally consume unlimited
> > amounts of data - they consume what they need. And, now that people
> > are well and truly comfortable with quotas on their service, moving to
> > a true resources-based system is hardly much of a mindset change like
> > it once might have been.
> >
> >
> > The advantages of this approach are:
> >
> > a) RSP scaling costs match revenue much better than a menagerie of speed
> >   proxies
> >
> > b) Consumers aren't penalized with slow speeds just because they are
> >   light users
> >
> > c) All consumers get the best speed experience possible and are thus
> >   likely to grow their usage which means quicker revenue growth
> >
> > d) No "chilling effect" on the development of high speed applications
> >
> > e) RSPs have no incentive to throttle consumers
> >
> > f) It makes pricing transparent to the consumer
> >
> > g) It takes NBNCo out of the performance discussion
> >
> > h) It lets NBNCo focus on continuously improving the LL
> >
> >
> > All that needs to be done is:
> >
> > a) Replace CVC with a quota/resource system to maintain an appropriate
> >   ROI on POIs. Basically $X per MB delivered.
> >
> > b) Replace AVC with a fixed LL upkeep/ROI fee
> >
> >
> > The main down-side is that given the MTM - it will expose the lower
> > speed services for what they are: vastly inferior to the higher speed
> > services. That might not be politically palatable under the current
> > regime.
> >
> > It will also more directly expose RSPs who under-provision rather than
> > what we have today which is to smear the blame between NBNCo and
> > RSPs. But that's a good thing, right?
> >
> > Of course the resources-consumed pricing could still be set absurdly
> > high to suit the politics of making the NBN "profitable" for a future
> > sale but that is obscured now with the complex pricing. It will be
> > much more transparent with a simpler resources system. Also a good
> > thing.
> >
> >
> > Mark.
> > _______________________________________________
> > AusNOG mailing list
> > AusNOG at lists.ausnog.net
> > http://lists.ausnog.net/mailman/listinfo/ausnog
> 
> _______________________________________________
> AusNOG mailing list
> AusNOG at lists.ausnog.net
> http://lists.ausnog.net/mailman/listinfo/ausnog
> 
> _______________________________________________
> AusNOG mailing list
> AusNOG at lists.ausnog.net
> http://lists.ausnog.net/mailman/listinfo/ausnog