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

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