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:-

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…

Damian Ivereigh

MD Launtel

6th October 2018

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

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.

Damian Ivereigh
CTO Launtel

It is with a some sadness, but no great surprise, that we heard that Telecube is to stop offering NBN plans. I feel this is unfortunately the first part of the issues of the NBN retail industry that I wrote about just two weeks ago.

My understanding is that the company has gone straight to liquidation which means that there is no prospect of any of the business being worth saving. Their upstream wholesaler has been acting quickly to disconnect the services that were being provided by Telecube.

For Telecube clients in Tasmania and Canberra who are left without an internet connection we are happy to provide you with a 7 day free trial of our service. I am hopefull you will not be headed back to the big telcos! I note that some of the other providers are providing discounts to people to come across to them. Unfortunately this is the typical knee-jerk answer to “how can we get customers?”, which created Telecube’s problems in the first place. Our industry has to get out the habit of discounting to get customers, we need to build value in other ways – like customer service!

Damian Ivereigh
Launtel CTO
02/09/2018

I have written in a previous blog about how we need to get FTTP rolled out all across Australia. As far as I am concerned this is an economic imperative. However the biggest argument against doing this is the cost – is the country prepared to put up the capital required to do it? I believe this is a sound investment in our economy, but how about we arrange for it to be done for “free”?

To understand how this works it is important understand what NBN actually is. At it’s core NBN is a construction company who rents out the products it builds. This is no different from a hotel developer who spends a lot of money building a hotel in the hope of being able to rent out rooms by the night for many years to come.

Now it is clear that the owner of a five star hotel can clearly charge more per night than the owner of a three star hotel. An enterprising investor could use this fact to do a deal with the owner of a three star hotel who is currently turning away customers that want a five star hotel: “if I pay for the renovation of your rooms, could you give me whatever you earn extra on your room rates?”.

This is actually a good deal for everyone involved. The hotel owner doesn’t have to find the capital to upgrade his hotel, the investor just has to provide the capital to do the upgrade (not the entire hotel) and gets a return on his investment without having to get involved in running a hotel. Finally the customers are happy to pay extra because they get a higher quality room. A few rooms can even be left un-renovated for the budget clients.

The NBN is like the hotel owner with the 3 star hotel whose customers want to pay more for a faster service than NBN is currently able to provide. Can we use the same method to allow outside investors to pay the upgrade?

Currently NBN provides two main ways to pay for upgrades. The first is a single premises tech switch where NBN charge whatever it costs them to install FTTP to that premises. This is the most expensive method because a lot of infrastructure must be upgraded to get that first premise connected. Prices in excess of $20,000 are not uncommon. There are some equity issues when the next person gets it a lot cheaper because the first person has paid for most of the upgrades.

The second upgrade method is an “area switch”, this is where the entire area typically serviced by a single FTTN cabinet is all upgraded. This is actually the cheapest way to do it, per premises – around $2500 – however every premises must be done.

Right now when a tech switch is done NBN actually gets two bites of the cherry. They charge for the upgrade itself AND they then are able to charge extra for the higher speeds sold, that they would have never been able to sell without the upgrade. I do not believe this is intentional on NBN’s part, but it is important to see how this is paid for.

So if NBN were willing to give up that extra revenue it earns from the higher speeds (100/40 and above). This is revenue that it couldn’t have got anyway without the tech switch. This revenue can be used to give a return to an investor.

A superannuation fund (or other investor) stumps up the money for the area switch and anytime a higher than 50/20 service is sold by NBN (via an RSP), the extra revenue over the 50/20 price ($45/mo) is remitted to the investor. Initially the revenue from the faster speeds would be quite low (not many people take 100/40 and above), but over time this is only going to increase – we are talking a 40 year investment.

At which point NBN could even turn around and sell “high speed revenue” rights to the areas that are already on FTTP. It would be a way of at least partially selling off NBN.

So let’s run some numbers using the NBN’s new bundled pricing.

Right now in a typical area about 25% of people take a 100/40 or above. For the moment let’s ignore the speeds higher than 100/40 and say they all take 100/40 – bundled revenue is $65/mo – revenue remitted to investor is 65-45 = $20/mo per connection.

So let’s take an area switch of say 500 premises.

Upgrade cost: 500 x $2500 = $1.25m. Revenue from that area: 500 X 25% X $20 = $2500 per month or $30,000 per year – a 2.4% return on investment. Not great, but not bad either. However from here is where it get’s interesting.

Once upgraded to fibre more people will take the faster services because they will actually get the speeds! Also business districts would likely have a much higher takeup rate and of course over time people will slowly move up. Let’s say the takeup rises to 100%, now we are looking at 4 times the revenue – a return of 9.6%. Now that is a rate of return that super funds would get really excited about. That is way in excess of what toll roads produce. Don’t forget this is a seriously solid investment, it is government backed and it is infrastructure in the ground – it’s not going anywhere and there is no way we’re not going to need it the future (there is no tech that comes even close to the capacity of a light pipe).

All the above hasn’t consider what happens when people take faster than 100/40 (250 and above), then on the current pricing the revenue keeps climbing. However I would argue we need to bring the price of gigabit right down (it is too high at the moment – around $180/mo).

There you go, that’s how we get Australia upgraded to FTTP without spending an extra cent of government money or people having to pay for their upgrades.

Damian Ivereigh
Launtel
26 August 2018

I am an engineer and am very much more comfortable sitting at a router command line than addressing a bunch of people. However over the years I have realised that in the modern technical world, decisions are still made by people, often very non-technical people. Unless we talk to those people about the some of the key technical issues, poor decisions are made. It is no longer good enough to be a nerd sitting in front of your computer and expect others to “just get it” and then complain about the decision.

A clear case of questionable decision making was around the switch from NBN’s FTTP rollout to the Multi-Technology Mix, which is predominantly FTTN. In my opinion this showed an extraordinary lack of forward thinking. However why did they lack this forward vision? Because we people in the know who live and breath this stuff did not prosecute our case well. As an engineer there is no use complaining about this – we have to go from here. The NBN is due to be completed over the term of the next government. Where we go after this is most definitely up for discussion.

Dale Carnegie said that “A man convinced against his will is of the same opinion still”. I see this all the time. People (often key decision makers) are dismissed by the engineering fraternity because they don’t understand the technology. How about we help them understand?

Over the years I have honed an argument for why we should have FTTP, it is all based around economics. The intention is to guide someone from their position (which is usually not a strong position) to one where they clearly see the argument for pure fibre. Feel free to share and use it.

A typical conversation would go something like this:-

Other: “I understand that FTTP is better technology, but it is so expensive, can we really afford it as a nation? Isn’t FTTN good enough for most people? Why spend all the extra money?”

You: “Yes agreed, compared to other technologies FTTP does have a very high investment cost. However this is a long term investment in our economy. It takes a long time to roll out any technology, it will have taken NBN, 10 years just to get to finishing the first phase of the rollout. Decisions we make now will have long term ramifications. Looking at our economy, would you say that a business’s ability to access the internet has become very important to the efficient running of that business?”

Other: “Oh yes without question, almost everything a business does these days is in some way connected to the internet.”

You: “OK and would you say that a business’s need to access the internet is going to increase, or decrease over the next ten years?”

Other: “Oh it is pretty clear this is only going to increase, some say exponentially.”

You: “So if a business’s internet access fails, what do you think that will do to their business?”

Other: “It can be disastrous, I have heard of businesses closing the doors for the day because their internet has failed.”

You: “What about capacity, do think a business is going to transfer more or less data and need a higher or lower speed, than today?”

Other: “For sure, speed and bandwidth are just going to go up and up.”

You: “OK so we agree then that almost every business now needs access to good, reliable internet and this is only going to increase into the future. Would it be a stretch to say that our economy will really run at the speed, capacity and reliability of the internet we can access as a nation?”

Other: “Yes that seems reasonable.”

You: “So we are standing at cross roads right now. We have to make a decision about what technology we can rely on that will provide our economy with the internet access it needs to grow over the next 10 years. We can’t really to take a lot of risks here, this is our economy we are talking about. We can’t just cross that bridge when we get to it and hope to muddle by in the interim. Surely we need to be planning this stuff now.”

Other: “OK, I see where you’re going”

You: “So what technology is there out there that is tried and tested, is guaranteed to work, will have the capacity that our economy needs not only for 10 years, but 50 years into the future?”

Other: “Well I guess its fibre.”

You: “Yes, surely there is only one: pure fibre all the way to the premises – FTTP. Nothing else comes even close in terms of longevity, reliability and ability to deploy today. There isn’t anything else even on the horizon. Yes it’s expensive to roll out, but compared to what? A poorly performing economy?”

Other: “Yes. I see what you mean. But what if some other technology comes along that may be just as good and cheaper, like 5G, we will have wasted all that money!”

You: “Then it will join the mix of technologies available. However I think this should be considered highly unlikely. Don’t forget that our bandwidth demands are growing at an extraordinary rate (doubling every 2 years according to the ABS). Any technology not only has to be as good as fibre right now, but in 5, 10, 40 years time. We spend a small fortune on building roads for cars and trucks, but there are significant clouds on the horizon about whether we will need the roads. When self driving vehicles are a reality and every vehicle drives at 200Km/hr, two meters behind the vehicle in front with synchronised braking and acceleration. Maybe we will not need all these highways in 20 years time. Yet we still build them now. We have to make our best guess at what we will need in the future. An investment in FTTP has got to be an almost dead cert investment in our economy.”

Obviously every discussion will be different, but the trick is guide people through a logical process so that it’s clear that there really is no other choice. The main thing holding back the case for full fibre is simply that most people and certainly most decision makers have not thought it all the way through. Once they do this the answer becomes obvious.

Good luck!

Damian Ivereigh
CTO Launtel
26 August 2018