Thursday, March 10. 2011Monopolies Have Different 'Rules'........John Linton ....government monopolies have completely different 'rules'. I read this yesterday: http://www.computerworld.com.au/article/379187/optus_calls_nbn_volume_discounts/ which I had long realised would only been a matter of time for it to be raised overtly but I was disappointed that Exetel's largest supplier was the one to do it. Perhaps they were only doing it to ensure Telstra didn't quietly reach some 'special relationship' deal? The points against such price structuring have all been made in the article - in the days of automated systems there is no cost benefit of 'volume' - each transaction is 'unique' in that it addresses the need to 'turn on' a service to a unique location via some process that incurs the same cost for each unique end user location. In a competitive commercial environment the scenario is very different where two or more suppliers are vying for business from multiple wholesale buyers and need to make their different offerings more attractive to gain and retain wholesale customers in that competitive environment. In the case of the 'NBN2' no such competition exists and therefore no 'special pleading' exists. With the 'NBN2' you either buy the service at the price nominated or you don't buy the service at all. As Julia Roberts' character remarked to the Richard Gere character in Pretty Woman - "I appreciate this whole seduction thing you've got goin' here, but let me give you a tip - I'm a sure thing. Okay?".....and that, I thought, was the one and only benefit of the government monopoly as far as the end user was concerned - they actually knew what the COST of the 'NBN2' port was to the wholesale provider and could clearly see what 'mark up' the various resellers were asking them to pay and whether they felt inclined to pay for the supplier's advertising campaigns and internal wastefulness and......... Now the actual COST charged by the 'NBN2' may well be too high simply because a government monopoly is easily, and without a shadow of a doubt, the most inefficient way of delivering anything. However, that is history now as the electorate at the last election chose, well sort of if you count two renegade, pork barreling hayseeds and a couple of princesses, to allow the 'NBN2' to happen and therefore "democracy" has elected to pay far too much money to eliminate all future competition for a residential fibre service. Done and dusted - like the $27 billion of tax payers money annually p***ed away on militarism it is simply one more burden imposed on tax paying Australians because they are collectively stupid enough to allow it to happen (that's what stupid people/sheep are for - to allow the unscrupulous and venal to shear them until they bleed). But a government monopoly that introduces a volume cost structure is about as sensible as inviting President Marcos back to 'power share' in the democratic government of the Philippines. I thought the whole point of wasting $50 billion building another fibre network with tax payer money was to eliminate Telstra from ensuring there was only one viable supplier of communications services in Australia? And now Optus is suggesting that that tenuous advantage is legislated away? Can anyone in this benighted country keep their lying stories straight for longer than it takes a politician to pocket a brown envelope? Or is their judgment that the whole country is so incredibly stupid that no-one has enough memory capacity to remember what they said last time they were offered some justification for doing something? Clearly the latter. PS: ....and the mind blowingly unbelievable hypocrisy of the year award goes to.......Telstra ......yet again: http://www.smh.com.au/business/community-card-dealt-in-plea-against-monopoly-20110309-1bnzz.html Copyright © Exetel Pty Ltd 2011 Trackbacks
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I don't think Telstra's position is hypocritical.
The company has been hammered by the ACCC on competition issues which has allowed cherry picking of profitable areas and an almost complete abandonment of rural areas. Surely the hypocracy is with the Govt for wishing to do the same thing they were so critical of. Especially after selling a vertically integrated Telco at full dollar, killing it, then setting up a new one. We all know the NBN is a basket case in a normal commercial sense. Comment (1)
I presume you're not really surprised by Optus' submission. They are just trying to protect their future market position by using their current market position using whatever argument might seem reasonable. Of course it is nonsense.
However it is worth noting two things. Not all NBN based services will be equal (in the same way wireless on the same network may not be equal) AND there is scope for larger ISPs to gain an economy of scale. Both come about by understanding the NBN network structure. A user is connected from their network interface via fibre to an Fibre Access Node. From there the connections travel on a virtual circuit to the Network-Network Interface (presumably the Point of Interconnect) where the ISP/service provider will have backhaul to their network. The capacity of that link between the Fibre Access Node and the POI is determined by the provider and the provider's customers contest to use that circuit. While it is a flat rate per Megabit per second, clearly the flexibility to provision (or under-provision) increases the more customers on that Fibre Access Node. The charge for the PIO (Network to Network Interface) is not flat. So the more customers a provider has on a Fibre Access Node, the more scope for flexibility in provisioning. Which leads to the first issue, not all NBN provided services will be equal. If the link from the Fibre Access Node to the POI is under-provisioned by the service provider, their service will clearly not be as good as someone who fully provisions. Comments (3)
My understanding is that it works in exactly the same way as the current premium/standard Exetel/Optus wireless broadband plans work - the supplier controls the quality of the service to and from the POI....but the carrier controls the quality of the service from the residence to and from the POI.
We are happy with that. Comments (3)
I'm not sure that is quite right. I presume with your premium wireless, you could for example instruct Optus to under provision the bandwidth from their network to your POI. The same is possible with the NBN.
For the NBN, my reading indicates there are two links involved in getting data from the residence to the POI. The first is a dedicated fibre from the residence to a "Fibre Access Point" (FAP). There is no contention on this link. The second link is a consolidation of the first links from the FAP to the POI. The bandwidth on these FAP to POI links is purchased by the service supplier to service all THEIR customers on that FAP. That bandwidth is reserved for that service provider and cannot be exceeded. That service provider's customers contend for use of that link. It is basically internal NBN backhaul dedicated to the service provider. At this level, (FAP to POI) the supplier has control over the quality of service within NBN. They could provision the FAP to POI links to cope with peak usage - like Exetel does across its entire network. However it can also provision the FAP to POI links to be heavily contested at peak usage (like other ISPs do). In other words, a service provider / ISP has complete control over the provisioning of bandwidth for their sole use WITHIN the NBN network. And of course they pay for it too! So it is entirely possible for two neighbours to get entirely different performance out of the NBN simply because of the way their ISP provisioned the FAP to POI. No doubt the dubious ISPs will under provision and save on their NBN bill while others will provide a quality service by fully provisioning. The interesting part will be how the marketing will differentiate and whether customers will be that discerning. Comments (3)
You are incorrect in assuming Exetel can 'instruct' Optus in any way at all as to how they run their wireless, or any other, network. We can't.
However, unlike other Optus Data suppliers (including Optus itself based on our random tests) we do provision the POI/Exetel and beyond bandwidth fully. I take your point on how you see the 'NBN2' operating but that is simply business as usual for any buyer from any carrier - they let you buy as much bandwidth as you require/choose to and it's your problem if you don't buy enough. Comments (3)
So the NBN situation is new then.
The different and interesting thing is that an ISP needs to plan the amount of bandwidth they buy WITHIN the NBN network. So not only is the bandwidth from the POI to ISP important, but so to is the amount of internal backhaul and ISP provisions within the NBN. So unlike with Optus where you have to put up with the amount of bandwidth they give you from bases to the POI (or from Exchanges to your POI), with the NBN, Exetel will determine that. And back to the original - I'm certain that there will be quite a number of ISPs that will under-provision within the NBN network. Comments (3)
Nothing will change in how some ISPs will provision.
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