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

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags NBNISPinternodeSimon HackettCommsday Summit 2011

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

Lisa Banks

Computerworld
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?