What does a new government mean to ISPs?John Lindsay, CTO, iiNet Ltd

Today’s Agenda

• A little iiNet background• What we know about the Coalition plans• Why iiNet are NBN fans• What happens if nothing happens?• What don’t we know?• Rocket Science• Abundance and scarcity• Alternatives

A bit about iiNet

The iiNet global network

What we know about the Coalition NBN plans

Why the NBN is so attractive to iiNet

6

Access cost per user ($/mth) for like-for-like 12Mbs broadband and phone bundle - excludes backhaul & transmission and customer usage drivers

A similar access cost equation for on-net (metro) An improving access cost equation for off-net (regional)

on-netNBN

off-net

NBN

Our NBN approach and results

7

• Over 20,000 customers

• >60% of customer sign ups are new to iiNet

• >50% customer bundle voice and data

• Blended ARPU is ~$70

• 60% fibre, 35% satellite and 5% wireless

• 50% of customers buying higher speeds than 12 mbps entry level product

• Very low fault rate

Positive performance to dateMarketing approach

• Geographically targeted approach to NBN marketing based on roll out – more cost effective

• Customer communications up to 12 months from network readiness – “NBN education” focus

• Active customer management through decision and migration cycle

Potential stranded investment and ongoing costs

Operating costs include :

• Marketing and brand awareness – national brand presence• Ordering and provisioning – systems and process• Customer service and support costs – operating a scale call

centre• Billing systems processing and management • Employee support costs across shared services functions• Product support costs for complex bundles

Establishment costs include :

• Presence and transmission from 121 POI’s• Points of presence in 7 capital cities• Establishment of long term inter-city and international

bandwidth agreements• Customer authentication and management systems• Developing billing and NBN B2B system interfaces

8

Operating costs to manage a small national customer base (say 200k) are $30-40m per annumEstablishment of a national network - $30-$35m

Significant establishment costs to enable a national

NBN network presence

Significant operating costs to support and service 200k

customers

Analysis excludes direct customer related cost of sales (e.g access fees etc) and operating cost is based on 20-25% of revenue assumption

What we don’t know about the Coalition NBN plans • Anti cherry-picking – will it be repealed?• Will we be allowed to extend our fibre networks?• VDSL2 and vectoring – in 2007 CommsAlliance stopped the standards process after

members couldn’t agree on VDSL2 deployment rules.• Who is responsible for greenfield connections?• Will NBNCo be required to meet Customer Service Guarantee for 100% of connections?• Will FTTN look like wholesale “bitstream” ADSL with obligatory PSTN or like NBN UNI-D

+ UNI-V? Or something else altogether?• Will FTTN use the same POIs, or more, or less?• Will NBNCo revise its FTTP product set and pricing?

Rocket Science• NBNCo are building 10 Satellite ground

stations• Each linked to all the POIs servicing users

in region• Assume 2% of premise get satellite,

that’s 180,000 households across 121 POIs so 1,500 total users per POI

• In theory this avoids “disadvantaging” business near the POIs running web sites

• In practise the large service providers only swap IP traffic in capital cities

• Will load unnecessary costs on RSPs

POP

POI

GroundStation

POI

POI

Scarcity

Image credit: William Murphy – Flickr. Creative Commons License.

• When you build something with abundant capacity and then limit access to it you create artificial scarcity, a famine…

• Like the Potato Famine, the causes are multiple, but we’re ignoring people who have been waiting since 2006 (OPEL) for useable, affordable, reliable broadband

Abundance

• Why have access speed tiers?• Why have bandwidth based CVC

charges?• We’re paying for it so why can’t

we use it?• We have a cornucopia of

capacity in new networks but $20 per megabit CVC charges will choke the future growth of broadband services in Australia

Image credit: Sally Oh – Flickr. Creative Commons License.

Do we need all this?

OR

A new alternative: stripped down FTTH

One Ethernet port (not 4 x Ethernet + 2 x PSTN + Battery)• Delivers government outcomes – major cost saving and installation time saving...• Other benefits:

– Removes need for 6 virtual networks inside each NTU (cost saving)– Avoids permanent single vendor lock-in (competition)– Allows multi-vendor network hardware deployment (competition)

or NBN could also offer just the fibre port• RSP can supply router direct to end user• Again, this reduces cost and timeframe.

Summary

• Retail service providers have made significant investment to use the NBN• iiNet likes the economics, performance and reliability of the current NBN• The economics of POIs, CVC charges and technology changes are threats• Satellite economics are going to bite as soon as the POIs shift to regional areas• Abundance beats scarcity unless you’re a vendor who can control supply• It’s not too late to change direction on FTTP, reintroduce competition and radically

simplify rollout

Thank you for listening!&

Questions