Why NBN Co Is Wrong About Gigabit Broadband

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Last week, NBN Co CEO Bill Morrow took a beating for claiming Australians won't use a gigabit broadband service, even if it was offered for free. He hit back at his detractors with a lengthy opinion piece, explaining his position. We take a look at some of the arguments he made and breakdown why they are flawed.

It's not the first time Morrow has said that there's currently very little demand for gigabit services. Here's what he said last year at NBN Co's full year results presentation:

"The thing I want to point out is that we did some research of companies overseas — Google, Comcast, AT&T and so on — to ask about their Gigabit per second services and asked whether there was a lot of uptake. The answer was no, but they offer them as a market competitive element."

He echoed this sentiment again at this year's NBN Co Half-Year Results event… and put his foot in it when he uttered this statement:

"Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway ... we know there are things on the horizon that are going to increase the need for further demand.

Naturally, people got angry, hence Morrow's opinion piece response. Here is a list of his key arguments and why they fall short.

Argument #1: People Don't NEED a 1Gbps Connection

Now, you can't dismiss some of his claims, especially the one about how 83% of people on the NBN are opting on broadband services based on the lower wholesale speed tiers. That's just a fact. He also pointed to meetings with global operators offering 1Gbps services that said end-users aren't really taking full advantage of them.

"Even in a heavy usage household right now it’s likely you’d struggle to generate the need for anything close to a 1Gbps - if you had five 4K TVs streaming 4K movies simultaneously then that’s only around 100Mbps being consumed - leaving 900Mbps idle," Morrow said. "Given that the vast majority of current online video viewing is in SD or HD - requiring only 2Mbps-5Mbps then a 1Gbps pipe would be enough to stream 200 HD streams simultaneously - way, way beyond the requirements of a normal household."

Again, he is right. But there's no denying there is definitely a future need for 1Gbps connections. As IT analyst firm Deloitte notes in a 2016 report:

"A Gbit/s Internet connection might appear frivolous, but a decade ago some commentators may have questioned the need for a touchscreen-based device capable of transmitting data at 150Mbit/s, with storage for tens of thousands of HD photos, video quality sufficient for broadcast…, secure fingerprint reader, and billions of transistors within a 64-bit eigh core processor. Yet modern smartphones with this specifications are likely to sell in the hundreds of millions of units this year.

While a Gbit/s connection for a single device or a single application may be overkill, consumers are likely to continue accumulating connected devices in the long term."

Morrow had said NBN Co will look to accommodate for applications that demand higher speeds than what is currently being offered on the NBN. But the NBN in its current form has long been criticised for being challenging to upgrade in the future. NBN Co's adoption of FTTdp in some rollout areas is encouraging, but the company is still predominantly working with inferior FTTN technology.

Also, even if 1Gbps is a bit of an overkill for the average consumer, a readily accessible superfast broadband connection like that would be a boon for small and medium businesses. It would enable them to launch digital services and compete at a global scale more easily.

Argument #2 A 1Gbps Service Would Cost Too Much

Morrow said that while city states like Singapore and Hong Kong can afford to offer 1Gbps connections for as low as $49 per month, such prices are impossible in Australia since the capital cost of building the NBN is much higher.

"The NBN network is costing around $49 billion to build - and we need to recoup that cost - given that our business model is split between driving revenues from access and consumption charges, we simply cannot match the kind of 1Gbps pricing on offer in markets like Singapore and Hong Kong.

Morrow also noted that NBN Co already offers a wholesale 1Gbps product to internet service providers (ISPs) that can be made available to more than 1.5 million homes. So far no ISP offers 1Gbps product to the public.

"This is, in our opinion, because there is still minimal consumer demand for these ultra-fast speeds – especially at the prices retailers would have to charge for them," he said.

What Morrow failed to address is that the way NBN Co charges ISPs for NBN services is based on consumption through what is called a connectivity Virtual Circuit (CVC) charge. This makes it cost prohibitive for ISPs to offer faster broadband speeds.

As for Morrow's statements about how the high capital costs of building the NBN and needing to recoup the money, the fact is the company is building a network with short-term goals. It's already splashing out a lot of money on a predominantly FTTN network that is likely to become obsolete in the near future. Then more capital costs will be incurred when the network will need to be upgraded. Why not just do and it once and do it right? Because, politics.

Argument #3 We Can't Compare Ourselves with Other Markets

"For a variety of reasons, our broadband upgrade in Australia started much later, so we cannot judge ourselves against markets like these; they are much further along on their journey and you just can’t compare Australia to Singapore or Hong Kong for obvious reasons including those stated above," according to Morrow.

Well, can we at least try to catch up with those markets more rapidly? We are currently moving at a snail's pace on the broadband front.

Customers on NBN's FTTP footprint may enjoy up to significantly better download speeds but those in FTTN areas have been complaining for ages that they're getting ADSL2+ equivalent performance from their connections.

Even NBN Co's own advertisements shows a futuristic Minority Report-esque version of Australia, but that's unlikely to become a reality with our mediocre broadband connection speeds.


What do you think about NBN Co CEO Bill Morrow's justification for why we don't have 1Gbps broadband yet? Let us know in the comments.

NBN Rethink: Why We Need 'Fibre-To-The-Driveway' Right Now

Ever since the Coalition government came into power and declared it will use the fibre-to-the-node (FTTN) model for the National Broadband Network (NBN), experts and vocal technology-conscious citizens have been up in arms about it. But the argument against FTTN has been mounting for years. Faced with overwhelming evidence and new technology alternatives, the Government can no longer ignore that their NBN vision is short-sighted. They need to act now instead of dooming us to an archaic broadband network just to save face. Here are four reasons why fibre-to-the-distribution point (FTTdp) needs to be adopted for the NBN.

Read more

WATCH MORE: Tech News


Comments

    His whole response is based around two things:

    1) Most CURRENT applications, designed for low bandwidth internet connections, wouldn't use much of a 1Gbps, true. But Netflix et al could literally "flip a switch" and saturate that 1 Gbps connection, resulting in much higher quality video being delivered. It's the same old story: no commercial company is going to make stuff their customers can't even use, and basing "future demand" on existing applications is not very smart (unless you are trying to justify why using an obsolete slower technology makes sense?).

    2) The NBN sets the prices, and they want their money back tomorrow. Ergo, 1 Gbps connections are not affordable, even though on a well built fiber optic network the difference in delivering 100 Mbps and 1 Gbps is negligible. Of course people don't want to pay $1000 per month for 1 Gbps.. but that does not mean that demand for a 1 Gbps service does not exist, and I guarantee him that if it was offered for free, lots of households would make good use of it. Sure, there'd be a lot of households that wouldn't, but that's why they have plans for different needs, right?

      The problem isn't that "omg you need four 4x netflix streams" to saturate your connection like he seems to think. It's that there are often parallel things going on. Game patches, netflix streaming, video chat, gaming, browsing, windows updates and so on. I don't disagree that *most* people wouldn't saturate a 1Gb connection *most* of the time. But I can definitely imagine a normal 4-5 person house having peaks where 1Gb would be a godsend.

      There is another story about Gears of War 4 being a 101GB download (and something screwy going on so it wants to download 248GB) that's one game. 100GB for ONE game. Yeah I'd love to be downloading that on 25Mbit plan while the wife is watching 4k Netflix, the teenage daughter is watching something else and Skyping at the same time and the teenage son is downloading whatever.

      As for the original NBN comments;

      "This is, in our opinion, because there is still minimal consumer demand for these ultra-fast speeds – especially at the prices retailers would have to charge for them," he said.

      If this was what he'd said instead of his idiotic "people wouldn't use it if it was free" comment there'd be no where near as much uproar. It's like saying "Oh because people don't eat caviar people wouldn't eat it even if it was free".

    WHAT ABOUT UPLOADS!?!?!? The internet is a two way street and we continually go on and on about ONE of the ways. Upload speeds are a huge issue. My partner works from home but has to go in to the office to do any EDUCATIONAL video uploading because it would be literally faster for him to put the data on a hard drive, CRAWL 30km to work and give the hard drive to someone than it would be for him to upload the content. If you consider the abysmal upload speeds (and capability in ADSL) then 1GB internet is not that bad

    The wrong technology, at the wrong price, at the wrong time, delivered wrongly.
    We'll be ruing his stewardship of the program for generations to come.

    These price/service tiers only make sense if you have limited bandwidth. Is nbn Co's true guiding principle: 'Build it cheap so you can charge more'?

    What's wrong with the LNP's version of the NBN is that they don't appear concerned with future-proofing. In 1994 28.8Kbs was the top speed. Today there are ISPs in other countries offering 10Gbs. That is, speeds that are 347,000 times faster.

    I believe that if we don't put in the infrastructure today, tomorrow we'll be left far behind or paying excessive amounts of money trying to access 3rd party wireless services.

    Also, even if 1Gbps is a bit of an overkill for the average consumer, a readily accessible superfast broadband connection like that would be a boon for small and medium businesses. It would enable them to launch digital services and compete at a global scale more easily.

    This is an understatement of unrealized potential. Fiberals have made it their point to ensure that the internet is only for home users watching tv. Yet we all know that they are screwing small-medium businesses. Cloud services are critical backbone for small-medium businesses productivity and increased revenue.

    Of course if people are used to/forced to/willing and able to afford to pay $60 for a 12Mbps connection the maths says that a 1Gbps connection would cost $4167 per month..(with data throttled once you have used your "reasonable usage" allowance) ouch, yep nobody in the Private wold is going to pay that, actually it would be cheaper to set up another whole network for that Price (isn't that what the NBN is supposed to be).

    Yes there are very few users (Corporations included) that would Utilise a 1Gbps connection 100%. Yes there would be bandwidth going unused for many billable seconds, but we are in a world where it is the infrastructure that costs a bomb, the actual data costs very little to send down the pipe.
    It is just that the Data is the commodity, while the pipe is "invisible infrastructure", therefore the data is where the Pricing is always going to be at (plus why deny a For Profit entity of its Profit - when it is a fully owned and operated government run monopoly).

    Maybe a whole new way of thinking is needed. Maybe a cheap plan which suits the average user (think about $20/mth would be good, allowing streaming 2x 4K and 2 computers browsing / youtube etc... For huge downloads OR UPLOADS which require very high speed (think 1Gbps for 1 hour) in order to be performed in a timely manner an on-demand huge SYMMETRICAL capacity with "open and accountable" surge pricing (book your slots just like a low cost airline) could sort out the issues, let the market sort it out.

    (It is the A in ADSL which has made the broadband experience for many people so frustrating)

    NBN Co. Don't tell people what they would or would not do or need.
    Get the infrastructure working, or some Multinational Telco will "own you" again in the very near future.

    PS. it isn't the fact that there "is" copper in the network that it is the Problem (copper can easily work at the speeds "deemed acceptable" - (Back in 2013 there were stories about copper and 1Gbps being do-able)), it is the extrinsic factors like distance from the node, combined with waterlogged pits and old insulation that causes problems.

    Last edited 17/02/17 1:02 pm

      Yes there are very few users (Corporations included)

      Try every business over 20 staff working out of the cloud. Office 351 has an utterly massive impact to congestion alone. Speaking to businesses who have moved completely to the cloud 100MB was so far from enough. The lag for email communications are beyond painful. When you have 20 computers + 20 mobiles + 20 tablets with active connections to exchange over the internet it tend to bog down most internet connections. File transfers occurring constantly, web traffic, app & OS updates not to mention line of business transfers & most of all - BACKUPS.

      Last edited 17/02/17 2:24 pm

    Never really ceases to amaze me the utter lack of foresight planners have for anything.. If you are going through all the effort of digging up everything just to Lay few fibre optic cables, why oh why don't they lay 100's of them, huge thick bundles to create a backbone that's measured in tbs!

    Even if we did have 1gbps connections, it wouldn't make an ounce of difference since ISPs interconnects in Australia would not have the capacity... prime example is i have a TransACT vdsl2 connection with a sync of 70mbps max throughput it 37mbps because of the lack of capacity.

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