When the NBN was first floated one of the primary goals was to “level the playing field”. Telecommunications usually favours the large player due to the amount of capital required for infrastructure. For 20 years Telstra called pretty much all the shots in the Australian telco industry and played a game of cat and mouse with it’s arch-nemesis the ACCC. Telstra was famous for favouring its own retail division over any of its wholesale customers for example. While NBN (along with the structural separation of Telstra) has done much to level the playing field, there have been a number of smaller, apparently less significant, decisions that seem to be going in the opposite direction.

Phil Britt of Aussie Broadband has publically criticised a proposed extension of the time before NBN will force telcos to switch off their old “special services”. Firstly I would like to point out I fully support Phil’s position, but I would like to add some meat onto the bones. Yet again we see the big telcos manipulating NBN to their own ends at the expense of Australia.

So why should you care? If your NBN is delivered over FTTN (Fibre-to-the-node) technology, which is the case for the vast majority of Australians, then a delay here will mean that you will have slower, less reliable internet for longer.

One of the downsides of FTTN is that it uses the same copper that is also used for phone lines, ADSL and also these “special services” – predominantly a phone technology called ISDN used by many businesses. Unfortunately when you run two copper cables next to each other, there is a tendency for the signal to jump from one cable to another – this is called “crosstalk”. The higher the frequency of the signal, the more that this is a problem and FTTN uses very high frequency signals. This crosstalk causes interference.

During the migration period when people are both using the old technology and the new FTTN technology (called in NBN parlance “co-existence”), to reduce this interference NBN have reduced both the frequency range and the signal power of the FTTN nodes. Because of this people have reduced speed and a less reliable internet connection.

Under the original FTTP rollout, there was an 18 month migration period when all the regular services (phone and ADSL) were forcibly migrated across to the NBN. There was actually no technical reason for this (copper and fibre run just fine side-by-side), it was purely a political and economic one. At the time the remaining copper based “special services” were the can that was kicked down the road to be dealt with later. However under the FTTN technology a decision to delay has real consequences.

Under FTTN the same 18 month migration period exists for phone and ADSL. We were all looking forward to the co-existence period ending after 18 months and people’s connections being turned up to full power, however because of these special services NBN still hasn’t turn off the “co-existence” mode at the node and is now talking about delaying it again.

So why would the big telcos be requesting a delay on this? As usual it is all about money. Firstly a telco typically earns more money on the old legacy services than the newer NBN ones. Secondly a telco has to engage with their customer and help manage the process for migration, this of course costs money. Thirdly whenever there is a network change, it typically is a time when a customer will re-evaluate its choice of supplier.

Indeed the biggest barrier to competition in the telco space is sheer customer inertia – if a service is basically working most customers are, quite reasonably, nervous to make any changes. This is unfortunately due to their experiences with the major telcos who regularly stuff things up during migrations.

The large telcos would very much like their customers just to do nothing and keep buying from them. However they are doing this at the expense of the quality of the internet for the rest of us. They have had plenty of time (years) to plan and execute this, if they are still not ready, then clearly they don’t want to be ready and are using this as yet another way of keeping the more nimble challenger telcos off their turf.

Damian Ivereigh
CTO Launtel
19/09/2018

It is with a heavy heart that we’ve decided that Launtel will not be sponsoring the free wifi at the next Festivale event in Jan/Feb 2020.

We’ve provided Festivale with free wifi for the last three years and we’ve very much enjoyed growing and improving with Festivale. The 2019 event was extremely successful to the point that on the Saturday night, the gates had to be closed – declaring for the first time ever that the event was full.

While Festivale draws people from all over Australia and even the world, it’s still very much a locally organised event, enjoying a lot of support and sponsorship by many local Launceston businesses including ourselves.

One of the things we love about Launceston is its community. People are not anonymous here, most of the people in the business community know each other and have worked with each other for many years, developing and deepening their relationships. One of things you cannot do in Launceston is burn relationships and expect there to be no consequences.

It was thus with great surprise that we learned that two of our friends and customers, both long standing marketing supporters and sponsors of Festivale, Effective Naturally and Walker Designs, were told by the Festivale Committee that they had a week to prepare a substantial Expression of Interest (EOI) document to provide marketing services for the next 2020 event. Despite their past relationship (and apparently successful performance), they were asked to start a tender process from scratch with very little notice. It’s unclear to us why it was done this way, with no prior warning. Both companies declined due to this short notice and thus will not be providing their services for the 2020 event.

Frankly this is not the sort of behaviour we expect to see from the Festivale Committee. It may be normal, corporate style, cut-throat behaviour in the major cities, but not in Launceston and certainly not in a community event such as Festivale. We understand we are talking about business here, however businesses are filled with real people. People form relationships with people, often long standing ones, not businesses. 

The treatment of our two friends has caused us to question our relationship with Festivale. Our sponsorship of Festivale was because we wanted to contribute to the community in what is clearly a fantastic event. Sure we got exposure and marketing from it, but nothing that we couldn’t get much, much cheaper elsewhere.We had hoped to have a long continued relationship with Festivale, but we now wonder if actually we’re just a source of sponsorship dollars (or services in kind) to the committee – to be discarded when no longer useful to them.

We understand that a new marketing company, Purpose Marketing, whose owner is the partner of the Chairman of the Festivale Committee, has been appointed and so we don’t expect this decision to be reversed. One can’t help but wonder if the new appointment has been somewhat unethical and a conflict of interest. We have decided that we no longer want to be part of an event that treats its supporters and sponsors this way.

Damian Ivereigh
Launtel
13th September 2019

 

Any parent, pet owner or manager will know that the basic tenet of managing anything is that you do your best to encourage good behaviour and discourage bad behaviour. This is the origin of the old “carrot & stick” saying.

Each of us have our own motivations and what we try to do is find ways to encourage behaviour in the people we work with that lines up with our motivations.

NBN’s Goals

So what are NBN’s motivations? There are three main goals set partly by the Government and partly by NBN themselves;

1. Roll out the network as fast as possible while keeping capital expenditure within budget.
2. Ensure the end customers have a good experience (“CX” in NBN parlance), both connecting to and using the network.
3. Raise the average revenue they get from each connection (via their customers, the RSPs) to at least $51 per connection per month (known in the industry as ARPU – Average Revenue Per User). This is to ensure the long term financial viability of the project. 

I’m not going to comment on the first goal, because this has been written about extensively elsewhere, it’s also not something that we as an RSP (Retail Service Provider), have much influence on.

The other two goals are heavily influenced by NBN’s customers, the RSPs. So coming back to my opening statement… wouldn’t you expect that NBN would support and encourage those RSPs that are helping them meet their goals? Unfortunately their actions to date haven’t demonstrated this, indeed they appear to be either doing the opposite or at best, ignoring the behaviour of those RSPs that seem to be aligning with their goals. They are behaving like the teacher who’s time is taken up attempting to deal with a few noisy, recalcitrant pupils who don’t want to be there, rather than helping those pupils that are interested in actually learning something.

The Bundles

The most obvious example is the bundles. In 2017 NBN had a big problem with two of the goals (CX and Revenue). RSPs were allowing their networks to become congested by not buying enough CVC – the capacity that NBN charges RSPs to deliver data to the RSP’s customers. This meant that end customers were complaining about poor performance (“bad CX”), which big RSPs where able to blame-shift across to NBN’s choice of technology. It was also impacting NBN’s overall revenue due to delayed take-up of services and people not interested in buying higher speeds.

So instead of asking “OK which RSPs are providing better CX and more revenue for us (i.e. align with our goals), what are they doing and how can we encourage more of it?” They instead went straight to “How can we force the big RSPs to improve the CX by providing more CVC to their customers?”

NBN released Focus on 50 and then the bundles, which essentially gives everyone a pre-determined amount of CVC bandwidth with each connection. Phil Britt, CEO of Aussie Broadband, was quoted in a presentation he gave to AusNOG: “In November 2017 nbn rewarded the big boys for behaving badly and the landscape changed again.”

The bundles were a short term fix, but they’ve created a bigger problem. While there’s no question it did almost instantly improve CX by removing congestion, the change was only temporary as our bandwidth usage has grown and we’re again seeing congestion return to some carrier’s networks. However, the second problem is that this has made it even harder for NBN to reach its $51 ARPU goal. The reason is that the bundles have homogenised the product offerings of RSPs. NBN have essentially told the RSPs how they should run their networks (how much CVC they should buy) by making it much more expensive to operate outside the expected amount. NBN took away one of the key unique selling points of those RSPs already doing the right thing: they damaged the business models of those RSPs that were generating NBN the most revenue per user.

Why is this a problem? In any market you need to have a range of products catering to different needs around price versus quality/performance. I drive a cheap Hyundai Getz because I am not interested in cars, yet some people will pay 5 times what I paid for my Getz to get a vehicle they enjoy driving or does more than going from A to B. That doesn’t make the Getz a bad car, it is just targeted at a particular market that happens to include me.

Commoditised Market

If a market is homogenised, i.e. all products are much the same, then the only thing to discuss is the price. We call this a commoditised market. This is very prone to happening anyway in the telco market where product differences are at best technical and hard to explain. This has not only lead to a fall in revenue for everyone involved, but has also lead to some atrocious behaviour with some telcos using sales tricks or even downright deception to get or keep customers, rather than product differentiation. The commoditisation makes it very hard for anyone (NBN or RSPs) to raise extra revenue by providing higher performance services, that at least some people will buy. Without the higher paying customers, NBN and the RSPs cannot afford to provide services to their lower paying customers.

Meeting NBNs Goals

For the record, at Launtel we aim to provide a very high level of network performance and customer experience. We do this by simply buying more CVC (“overage”) than most other providers along with an attention to detail and care around the support we provide our customers. We also charge more than most RSPs for an internet service. Thus we don’t cater well for those who are happy to accept a lower performance and want to pay less – we turn away people that want to buy a Getz because we are selling Mercedes. We don’t use tricks to get sales, we just let people try the product and see if it is for them – see if it is worth paying the extra money.

It should come as no surprise that we also provide more revenue to NBN per connection. As of today we pay NBN an ARPU of $55.24. In other words we are among the RSPs who are bringing their revenue average up, helping NBN meet their goals, both in terms of revenue and customer experience. You would expect them to be interested in what we have done, however to date they seem to be more interested in how to stop the big players from holding their customers to ransom by providing poor CX. 

Pricing Review

To be fair, NBN have launched a pricing review, which we have contributed to. Our submission includes a very detailed suggestion on how the CVC pricing could be restructured to encourage the RSPs looking to sell high quality/high performance/high speed/high priced services to sell more of those services. Many commentators would like to see the CVC charge gone, or have argued for the bundles to include more CVC, I don’t believe this is a good approach. It would just further commoditise the market. It would hurt NBN’s goal of raising the revenue it needs to further upgrade the network (e.g. towards the FTTP we know Australia will absolutely need within 20 years) and more to the point, make it harder for NBN to cross-subsidise the services for those who can only afford to pay less.

Don’t get me wrong I’m not looking for special treatment here, I’m just asking NBN to stop closing off a market (the high performance one) that would align very well with two of their important goals.

Damian Ivereigh
Launtel