The nbn emperor’s new Enterprise clothes

A little over 2 years ago nbn started selling a completely new fibre based product called “Enterprise Ethernet”. Without going into all the technical details, this is a fibre based telecommunications product capable of speeds of up to 1Gbps in both direction (aka “symmetrical”). From the engineering standpoint there is no question that this is a good product for business customers who need it.

The key word here is “need”. In my opinion the product is being heavily oversold to companies who really don’t need it. The original nbn was to be almost all fibre – FTTP. Had that FTTP rollout continued I don’t believe that Enterprise Ethernet would be a product today. Unfortunately, Enterprise Ethernet’s main purpose is to make up for the deficiencies in the network that occurred due to nbn’s switch to the MTM (aka using all the existing copper, HFC etc that was already in the ground).  

Alarm bells started ringing for me when nbn announced some “Business Fibre Zones” around the country. These were areas where nbn was offering Enterprise Ethernet with no upfront install costs. An industrial area north of Launceston, called Bell Bay, was not on this list. Various state and local political figures wanted to know why it had been excluded! 

It had probably been left off the list because it was one of the first areas rolled out with FTTP. They already had fibre! Yet the assumption was that they needed to have Enterprise Ethernet to attract the “world class” companies to the area. It was this point that I realised people had been drinking way too much of the nbn Kool Aid.

nbn had created a new “business nbn” team who job it was to push Enterprise Ethernet and other “business grade” products. Their first job was to label the existing nbn network a “residential grade” network. There was some truth to this based on the technologies that had widely been deployed. However somehow FTTP, which is most definitely a business grade product once extra Service Level Agreements (SLAs) are added, was tarred with the same brush. Launtel had for years been selling business products over nbn’s FTTP technology, including the first in the country to offer 1000/400 (1000Mb down, 400Mb up) back in May 2017. At one point we were heavily criticised by a member of the business team for doing this, I’m guessing because they saw it as a threat to their model.

So what is the difference between FTTP and Enterprise Ethernet? For most businesses, frankly not a lot. There is however a massive cost difference. A typical Enterprise Ethernet product will be 5 to 10 times the price of the equivalent regular FTTP product (aka NEBS) and you will be required to sign a multi-year contract to get it.  

OK so what if you don’t have FTTP, but one of the other poorer technologies: FTTN, FTTB, FTTC & HFC. These technologies are not only slower, but more importantly for businesses, much less reliable. Modern businesses need the internet as much as they need power, any failures cost them dearly as staff sit around unable to do their work. Those businesses have two choices: 1) sign up to a multi year Enterprise Ethernet deal from one of nbn’s retailers (of which Launtel are one) or 2) organise and pay for a technology upgrade to FTTP.

The second option, the technology upgrade, has traditionally been a very long winded and sometimes expensive exercise. nbn have made a few attempts at making this easier include a program where at selected addresses they would offer fixed price upgrades. However more recently nbn started offering free online quotes for anyone, put your address in and it would email you back a price. Unsurprisingly the website became overloaded and they shut it down again, but we expect that to be back online by the end of January. 

The advantage of the tech upgrade process is that it is a single upfront price and then that’s it. Enterprise Ethernet on the other hand is significantly higher prices not only for the entire contract, but also once the contract is renewed. You are also stuck with that retailer for the duration of the contract, regardless of the level of service they provide. However given that one off cost upfront can be a significant drain on a businesses cash flow we are currently investigating whether we can finance the technology upgrades. What surprises me is that nbn don’t do this – most likely because it would compete with their much more profitable Enterprise Ethernet.

So if everyone who needs it had FTTP, would there actually be a market for Enterprise Ethernet? Yes but it would be a very small – very specialised businesses who need the very low jitter, very low contention properties of Enterprise Ethernet, such as an options trader. If you are an accounting firm, a legal firm, a manufacturing business or even a designer or a school, you almost certainly don’t need it. All the modern applications we use today, including video conferencing is designed to run over pretty average connections. The reason is obvious, if they needed an expensive connection to work they would rarely be used (think how often on one of your Microsoft Teams conferences, there is someone working at home).  

Enterprise Ethernet is a very attractive proposition for both nbn and the retailers. The margins are generally very high, and customers are signed up to multi year contracts. It is easy to sell the “sizzle” of an “Enterprise” connection to a medium or large company who is used to paying these sorts of figures for their existing connections from the likes of Telstra, Optus etc – “Now you don’t want that residential grade FTTP do you, Mr Customer?”. Unfortunately these high margins have attracted some of the less ethical sales people that typically live in the telco world. Those who have no real idea of what the product is and why it is useful and more importantly when it is overkill.

What I find particularly frustrating is that nbn have created a completely new product, with completely different service qualification systems, provisioning systems, and different billing. They need not have done this, they could have easily created the product out of the existing NEBS FTTP product. However yet again, nbn have created yet more complexity for the RSPs to deal with.  

So if you are approached by a retailer offering you Enterprise Ethernet, ask yourself carefully if you really need this and whether a simple technology upgrade coupled with good quality retailer who provisions lots of bandwidth (during the work day, when most networks are less busy anyway) wouldn’t do the job just as well. If you already have FTTP, you almost certainly don’t need it. 

Damian Ivereigh