Cost of NBN to small ISPs "insane": Internode's Hackett

Internode's boss says ISPs with less than 250,000 customers will be all but wiped out

Internode boss Simon Hackett has delivered a heavy critique the costing model proposed for the National Broadband Network (NBN), stating that small ISPs will be all but wiped out under the current NBN arrangements.

The ISP's managing director, speaking at the Commsday Summit in Sydney, said the complexity of the costing model might deter smaller ISPs from participating in the NBN, due to a large number of customers being needed to keep it viable.

“Why has it been measured against 250,000 customers?” he said. “It turns out the NBN Company use that size across a number of examples and don’t use numbers smaller than that.”

Hackett said the cost of the NBN to smaller ISPs would be “insane” and that these groups would be disadvantaging their customers if they chose to sign up to the NBN.

"At 10,000 customers, it’s insane to connect these customers to your network...if you drill in a bit, the same thing [will happen for ISPs with] 10,000 to 100,000 customers.”

Hackett said hundreds of ISPs will be affected by the 250,000 customer business model, with only five ISPs being able to meet this number at a national level.

“Anyone smaller than us cannot survive attached to the NBN - it’s not complicated, it’s just the math,” Hackett said.

“It’s not part of the rhetoric we hear about the NBN...so five [ISPs] is a really interesting number.”

In an industry he described as needing to “squeeze out costs in order to survive”, Hackett said ISPs with less than 250,000 customers would need to migrate across the "valley of death" between now and 2021.

“[The NBN costing model] presumes that 250,000 customer ISPs will just appear from nowhere,” he said. “That steady state doesn’t happen until 2021. We have to migrate from being here to get to the other side.”

Hackett said last years intervention by the ACCC in the development of the pricing model, may have caused NBN Co to abandon rural areas, with an unplanned increase in costs first and foremost affecting those remote customers of the NBN.

“If you’re stuck for cash, you abandon the bush,” he said. “You don’t sell services regionally, they cost more...it’s that ACCC decision that will force regional costs up again.”

While Hackett said the NBN Co's pricing model, which he said is based on Telstra's wholesale model, had its flaws but he didn't think the organisation had deliberately set out to disadvantage smaller ISPs.

“This Telstra wholesale model is deadly... the model is actually a bit broken. It works in entry-level download speeds, but when taken out of that corner the costs creep up,” he said.

“The NBN guys didn’t mean to do this... I think they just copied a model that they knew.”

Hackett’s insights come as shadow communications minister, Malcolm Turnbull, earlier this week warned that NBN Co will be given “enormous power” under amendments to key legislation passed in the Senate late Friday.

Follow Lisa Banks on Twitter: @CapricaStar

Follow Computerworld Australia on Twitter: @ComputerworldAU

Tags Simon HackettCommsday Summit 2011ISPinternodeNBN

Recommended

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Lisa Banks

Computerworld

1 Comment

Ozzie

1

Not sure that this is a problem. One could argue that the change from dial up to broadband had a similar effect on "ISPs" (those providing direct connections). Some died, some were bought out and some moved to value added content. That process will continue. As for the bush, the new model doesn't require huge investments in poorly subscribed DSLAMs with huge backhaul costs, so I'm not sure what that argument is about. It would be nice to read a good editorial analysis of these comments.

Comments are now closed.

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?