Last week (Dec 2016) Northern Tasmania saw another internet outage with iiNet and Internode. It was caused by a fibre cut. Essentially someone, somewhere may have cut the cable by mistake. Next thing you know essential services have people lining up out the door with EFTPOS (like Chemist Warehouse did), businesses can’t make their phone calls and some no longer have their alarms. Businesses are often complacent about how much impact losing your internet and phones can really have.
But we were surprised to learn something this week. That iiNet/Internode only have a single fibre between Launceston and Hobart. So if it’s cut, there’s no redundancy and that’s asking for trouble. You have to wait for the complicated job of repairing the single fibre cable.
We have dual fibres running from Launceston to Hobart and from Hobart to Melbourne. We actually had a fibre outage during the floods (one of railway bridges that carried the fibre washed away) – but no-one noticed. Frankly this costs us more but is worthwhile given the reliability increase.
There is no question the new fibre network is better – the difference is the copper network had lots of micro-outages affecting small numbers of customers. NBN has outages affecting many people which creates more news. But if you’re serious about having reliable internet connectivity for your business, ask your potential provider, do you have one cable or two?
If you’d like to discuss a more reliable internet connection for your business, and a customised solution, contact our office right here in Tasmania on 1800 LAUNTEL.
So those who follow my various missives on the NBN and its issues will know that while the technology of the rollout will be an issue in the future (probably soon unfortunately), it’s not the big issue right now that’s causing slow internet. The issue right now is the CVC pricing – it’s priced in Mb/s and is essentially the amount of bandwidth allocated to all of a telco’s customers in a geographical area (POI). Due to the (quality/price) race-to-the-bottom we tend to have in telco, the temptation to skimp on buying CVC is just too high and we get the result we have today.
So how do we fix this?
VHA came up with some interesting suggestions but I don’t think they go far enough. Let’s start by looking at why the CVC charge is there in first place.
NBN (then NBNCo) was setup as a Government Business Enterprise (GBE) so that it didn’t appear as an expense on the budget. The rules of a GBE are that it must generate a commercial rate of return for the Government. This puts a floor on the revenue that NBN must generate overall. If they were to just wipe various charges, then NBN would be forced back on to the government budget and taxpayers would pay for it instead (oh the politics). The irony here is that all the discussion about the costs of the NBN have been as if the NBN actually was an expense on the government budget (like say submarines), not as if this was an investment and whether it was a good or bad investment.
There are two main components to NBN’s charge model:
- The AVC charge which is levied per customer and scales with the peak speed of the connection. A 12/1 is charged at $24, a 100/40 connection $38.
- The CVC charge which levied per Mb of bandwidth. It starts at $17.50/Mb but since a new discount model was introduced now decreases the more bandwidth the RSP allocates per customer, all the way down to $8/Mb.
When the pricing model was originally conceived, the AVC charge was kept low because NBN didn’t want to penalise the infrequent internet users (some of this thinking is over 10 years old – remember all those arguments about the NBN going to cost too much for the elderly) – so the charge was shifted across to the CVC as a usage charge.
The CVC charge currently accounts for about 35% of NBN’s revenue. So every time they reduce the price it appears they would drop revenue. Or would they?
Imagine you run a high quality hotel charging $400 per night. However due to the price, most nights your hotel is only 30% occupied. The revenue you get from the guests has to cover all the staff, rates, mortgage, power etc. regardless of the number of guests. How can you increase revenue? Drop the price! If you charged $200 per night, you would sell way more rooms – more than the 60% occupancy that it would take to recover the same revenue. Net result: a lower price actually creates more profit.
It’s the same with bandwidth and the CVC. NBN is in the main a construction project with a fixed cost, paid for with money borrowed from the Government which they need to pay interest on regardless of the amount of CVC they sell. So the trick is to make sure the telcos buy more CVC so that NBN’s revenue doesn’t suffer as they reduce the place. We need to break the Mexican standoff with the telcos saying reduce the price, while the NBN is saying buy more CVC, then we’ll reduce the price.
So here’s my fix.
Currently the telcos are allocating less than 1Mb per customer, sometimes much less – 500kb, which means NBN is receiving only between $10 and $20 per customer from the CVC charge. For any speed over 25/5, this needs to be raised to 5Mb per customer – yes that’s excessive, but stay with me. For 25/5 perhaps half that (and let’s kill the 12/1 speed tier). The price of all the AVC’s over 25/5 should go up by $20 but this 5Mb of CVC would be included in the price. For 25/5 it would only be a $10 increase, with 2.5Mb of CVC included. You will note this effectively reduces the price of CVC to just $4 per Mb, but also forces the telcos to actually buy it – thus protecting NBNs revenue model.
So why so much bandwidth? I think it’s crazy that we have created the CVC as the choke point on the bandwidth. Frankly a carrier’s back end connection to the internet should be the choke point, not the CVC. This would encourage carriers to do more “on-net” peering with content providers – just as they do on ADSL. This would push the adoption of more carrier backhaul bandwidth which would again bring down the prices.
Yes we would all end up paying a little more for our internet, but not much more (probably a few dollars a month) but the difference in performance would be absolutely dramatic. It would end all the current issues with the 6pm slow down and then we could get back to focusing on the access technology issues.
Posted on August 1, 2017
There’s an old joke about a balloonist who having lost his way spotted a person walking along a road and descended to ask where he was. The response came back “You are 50 feet up in the air”. After a pause the balloonist shouts back: “You must be a lawyer!”. The man responds incredulously, “well as a matter in fact I am, that’s very perceptive of you!”. “Not really, the information you gave me was 100% accurate, but completely useless.”
The ACCC have recently requested Aussie Broadband to stop using the term “congestion free”. They considered this an absolute term and since every provider, no matter how well managed, sees some congestion (this is due to the way networks work), they should not be using this term.
“We were concerned that Aussie Broadband’s statements might lead consumers to believe that Aussie Broadband’s services would not ever experience congestion, when that was not the case,” ACCC chair Rod Sims said.
In other words they were concerned that consumers may be misled.
So what is congestion? Technically congestion is simply a data packet being discarded somewhere in the network because there is no room on the next link for it to continue on its journey. This packet loss (i.e. congestion) is quite normal, indeed it is used as a signalling system for the sender to slow down to avoid further congestion and we as normal humans beings rarely notice it. So no network can ever be completely “congestion free” in absolute terms unless it is not being used.
So that technical description is clearly completely useless in helping a consumer make a decision about which provider to choose. What the consumer wants to know is will my Netflix buffer while I’m watching it? I do not believe the ACCC’s ruling helps in this regard because it has taken a very legalistic, absolutist position.
As human beings we use absolutes all the time when we know they aren’t meant to be taken literally. For example when my wife complains that I “never take the trash out”, I am not going to get very far pointing out that she is wrong because I actually took it out at the beginning of last year after the New Year’s party.
Now don’t get me wrong I am not arguing that we be loose with our marketing language, but we should always ask what is the intent of the communication? If the intention is to mislead people then that is wrong. I like to ask my marketing team would “a moron in a hurry” be misled by this communication? Would they make a purchasing decision they came to regret based on this information?
I do not believe that any customers would be misled by this “congestion-free” claim. What Phil Britt at Aussie Broadband is basically saying is “you won’t experience congestion on our network!”.
If the ACCC is going to object to “congestion-free”, why does it also not object to the term “unlimited data”? Unlimited means “no limits”, none, i.e. infinity. Clearly no broadband connection is capable of downloading an infinite amount of data. But if you’re going to take an absolute, legalistic approach, then this is an issue. What about acceptable use policies talking about an ill-defined “reasonable use”? That’s a limit to downloading surely? At some point we just have to understand that this is all about human language not legal language.
Part of the problem here is that we are dealing with an industry (telco) that is full of sharp practices. Telcos were time and time again creating incentives for their sales staff to mislead customers into signing up for long contracts that were hard to get out of. Unfortunately the ACCC has very little visibility into what call centre sales staff say, this is why it took so long for them to catch Optus misleading customers into signing up with them on the basis they (incorrectly) had no choice. They therefore spend more time looking at published advertising because it is easier than looking at the areas where customers are much more often being misled.
It is important to note that Aussie Broadband has no contracts, is very open about its CVC usage and has a “stop-sell” policy when an area reaches 80% capacity, so I find it hard to believe that anyone would be misled – as in made a buying decision that they later regretted.
At Launtel we make a number of claims about our network, our support staff and our whole way of doing business. Some of these are not dissimilar to Aussie Broadband (we often recommend them when we can’t supply a service). Our intention is to never mislead, indeed if ever a customer tells us they misunderstood what we meant and made the wrong decision we generally reverse the transaction even if that ends up costing us money. We do this because we want our customers to feel safe and that they are not getting trapped into something.
However our most powerful “get out of jail free” card is our 7 day free trial. We tell people just to give our service a go – see what it’s actually like for them. At the end of the trial they really should have a very good idea of what they are getting before they hand over their credit card. Even then we only charge for a service on a daily basis, so if something changes, people can stop buying our service immediately – they can even get a refund of any unused “charge up”.
We also publish our bandwidth stats at https://launtel.net.au/cvc-usage so people have a very clear idea of what we are doing. We, like Aussie Broadband, are intending to be the new faces of an open and transparent telco industry.
We certainly intend that nobody on our network ever experiences congestion, indeed if we find any, we treat it as a fault. We believe for that all the purposes that human beings need the term “congestion-free” for, that fits the bill. It is unfortunate that the ACCC has now decided that it does not.
Posted on September 8, 2018
I want to firstly point out I have never personally received significant money from Centrelink, however I know many people who have, including one current Launtel employee. Secondly this is not going to be some right wing rant about how people need to get off welfare. I want to look at the deeper issues about why the Centrelink system makes it so hard for people to stop using them. I believe Centrelink unwittingly behave like drug pushers keeping their users addicted.
The welfare system has long been described as a “safety net”, a way for the government to ensure that everyone at least has food on the table and a roof over their heads regardless of what happens to them in life.
When it was first created generally people either had a job or they didn’t. Only if you didn’t have a job did you get welfare. However this either-or situation has substantially broken down with the dramatic rise in part-time work. People now have half a job or a quarter of a job – or more likely an irregular number of hours according to when your employer needs you. The welfare system needed to adjust to this, however certainly here in Australia, they have done this in such a way to create a massive disincentive for people to look for and get work.
The first problem is a purely economic one. Given the rise in part time work, for many unemployed people, they can’t just “get a job”, the most they can expect is casual work and hopefully slowly increase their hours. Even employers see this as a logical move – they can “try people out” before committing to giving them full time work.
However as someone’s paid hours slowly increase, Centrelink starts to withdraw some of their Newstart payments. What is important to calculate is the “marginal tax rate”, or to put it another way how many cents of each dollar earned has to be surrendered to the govt either in tax or in reduced Newstart (or both). This is important because it guides how people react if they are offered extra work. The figures are quite interesting:-
|$0||$2704||0%||Centrelink allow earning up to $2,704 without penalty|
|$2704||$6604||50%||For every dollar earned over $2,704, Centrelink take 50c away|
|$6604||$18200||60%||For every dollar earned over $6,604, Centrelink take 60c away|
|$18200||$26264||79%||Over $18,200 pay 19% tax and Centrelink is still being withdrawn at 60c in the dollar|
|$26264||$37000||19%||After $26,264 only the 19% regular tax rate remains|
|$37000||$87000||32.5%||Regular tax rate up to $87,000|
What is very concerning is that if you are earning between $18,200 and $26,264 (highlighted), this is the period that 60c of each dollar earned is taken from Newstart in reduced payments AND you are being taxed at 19c in the dollar – an effective “tax” rate of 79%!
To put that into actual dollar terms: at $18,200 income you receive $23,000/yr in your pocket (still getting some Newstart), at $26,264 income you receive just $24,700 in take home (all Newstart has gone). So you have to earn an extra $8,000 in income to get an extra $1,700 in take home. If it takes 400 hours to earn that extra $8,000 – $20/hour – that’s just $4.25/hour in take home pay.
You can also see even after you earn $2,704/yr you are being effectively taxed at 50% and you know it is only going to get worse until you get to $26264. That is a “tax” rate that is higher than even people earning over $180,000/yr are taxed at (45%). This must be a substantial disincentive to earn more money.
All the above assumes that the people involved are what economists call “rational actors” – i.e. they think carefully about exactly what they do and the choices they make. In practice the people on Newstart are rarely like this. The conversations I have had with people who deal with Centrelink find the process confusing and difficult to predict. However what they can predict is that if they take on any work and earn money then Centrelink will require confusing paperwork, probably demand a repayment of money or a cut in future benefits. This can easily feel like a punishment. It is then very rational for people to turn down this paid work rather than deal with Centrelink.
I believe we have to look at the system that has been created by Centrelink as the problem and not the people who are stuck in it.
The second problem is the mental health effects of receiving Centrelink payments. I will cover this in my next blog article…
6th October 2018
Posted on October 6, 2018