NBN: Why have consumers hit a speed bump?
Opinion: While nbn pats itself on the back about its rollout figures, consumers aren’t exactly racing to take up high speed plans.
If there’s one thing you can say about the National Broadband Network (NBN), it’s that it’s never exactly quiet. You've got nbn (the company) building the NBN, and that's confusing enough in itself. Sometimes I do wish that the company was called something else, even if it was, say, "Broadband McBroadband BuildyCorp", just so it was easier to both write about and for folks to understand.
Anyway, this week, nbn (the company) was busy patting itself on the back due to hitting the target of 4 million "NBN-ready" premises. That figure represents a third of the substantial NBN (the network) build, and there’s no slowing down. Current plans call for 50% completion by the middle of the year.
At the same time, however, nbn has also released its revenue numbers for the half-year ending December 31, 2016. Some $403 million landed in nbn’s coffers in that time, which is a not insubstantial quantity of cash. Hand me $403 million and you won’t see me for the dust from my thongs as I race towards a tropical, extradition-free paradise of some sort.
The problem with that $403 million figure is that it represents customers who are increasingly flocking to services 25Mbps and slower. Leaving aside the smaller percentages of customers on fixed wireless and satellite NBN connections, where your speed choices are more seriously constrained, and that means that the majority of those who have taken up NBN connections are doing so at 12/1Mbps or 25/5Mbps rates.
That’s a problem for nbn, because the revenue models and targets are based around the assumption that a larger percentage of customers will flock to higher-speed plans. It’s not quite crisis time yet for nbn, but if it can’t get customers to jump to higher speed plans by 2020, there’s significant risk it won’t hit its planned $5 billion revenue target.
Which is all well and good and interesting if you’re a fan of the financial sections of news sites. If you're a regular consumer, there's a wider question here. Why are Australians seemingly not interested in faster Internet?
NBN: No speed guarantee
It’s important at the outset to recognise that, as with any Internet service, a predicted speed in NBN terms is a top speed, not a guaranteed continuous metric. Buy a 100Mbps plan and you may hit 100Mbps to specific servers if they have the bandwidth to accommodate your needs. Other, more constrained (or busy) services may be slower. That’s the nature of networks.
For nbn, though, the introduction of the mixed technology model has muddled that picture for consumers even more, leading to significant, albeit anecdotal dissatisfaction, especially amongst users on fibre-to-the-node (FTTN) connections.
The use of copper as the "last mile" between node and connection gives NBN speed tiers a serious degree of variability both in speed and even sometimes in accessibility. The quality of copper in the network has long been a contentious issue, but as services roll out more users are likely to hit situations where the remaining copper is their weak link in service provision. The official nbn line on this is that folks can upgrade to a full fibre service, but at serious cost, and even then, service reliability can be a significant issue.
Just to throw up one example, on the New South Wales Central Coast, for example, one NBN user resorted to stringing up Telstra 4G hotspots from trees to get any kind of broadband connection at all, as reported by the ABC.
He was on an NBN connection, but not one that provided the kind of service we should expect from any provider. To make matters worse, at first nbn denied there were any long term outages in his area, which doesn't do a lot to create a public perception of a quality network worth throwing cash at.
Speed: What is it good for?
The other issue that nbn has to contend in order to get folks to sign up to faster plans is the average consumer’s understanding of broadband speed and its application.
It’s not entirely shocking that folks looking to save a buck or two in constrained times might opt for a cheaper nbn plan, especially if they don’t get the benefits of a faster connection. Leaving aside the massive political football that the project has been since its inception, which has no doubt left some bitterly opposed to it on purely ideological grounds, many Internet users will have gravitated towards cheaper plans just because they’re cheaper.
For some users, especially very light Internet users, there’s absolutely nothing wrong with that. If you’re only intermittently online and a single user on a premises, 12/1Mbps could well be enough for your needs.
For others, especially multi-person households, however, the benefit in a faster connection isn’t so much to do with the raw speed, but in how you can divide that raw speed up. Broadband connections nearly always draw out road analogies, and I’m not one to break with convention, so here goes. If your 12/1Mbps connection was a road, it can take your small moped on it at an effective speed for your transport, and that’s fine for light users.
Once you add users to the road, however, you’re sharing that 12/1 connection, and allowing for internet variability, that may be problematic. Your YouTube videos buffer, your emails take longer to send out, and sites load more slowly.
To keep with the road analogy, a 25/5Mbps connection can take a high-end motorbike, but equally it could take a motorbike with a sidecar, with each user able to split the connection as though it were an (effective) 12/1Mbps connection. Scale up to 50/20, and you’re either in a sportscar by yourself, or a family van with multiple users. Those who can get 100/40 connections can bustle along in Bugatti Veyrons or double-decker buses, depending on need.
Frankly, nbn has to date done a lousy job of explaining all this, and it doesn’t help that it now describes NBN speed tiers simply as one-shot numbers, so they’re just "NBN 25" and so on. That's in line with the issues around the MTM plan, because technology differences do constrain what's possible on a given connection. Still, it’s well in nbn's interest to get more consumers on faster plans if only for its own revenue purposes. It’s only now that it’s started to suggest that 25/5 connections might be good for "everyday use", as we race towards half completion of the network.
The issue is one of understanding and there has been a pretty lousy job done so far in explaining what different speeds actually mean in ways that make sense to consumers.
It's so bad, in fact, that the ACCC has stepped in this week, publishing principles around internet service providers’ claims about broadband speeds to ensure that they aren’t misleading under the Australian Consumer Law. The nbn company isn't an ISP but a wholesaler to ISPs, but the way it describes its services that are sold to end consumers still fall into many of the same confusing traps as the ISPs.
It is no surprise that the ACCC found that some 80% of users had trouble comparing different broadband speeds and what they actually meant in real world use. For ADSL and mobile services you really don't have much control over your speeds, which are a function of (largely) distance and network load/conditions respectively, but for the way fixed line NBN services are sold you do, so I'd say it's fair to presume that a decent percentage of those confused customers are NBN customers. The number of complaints to the TIO around NBN speeds would certainly support that argument.
This is somewhere that nbn could have led the way with explaining, but historically it hasn't done so. Even now it uses terms such as "superfast" to describe its 25/5 service. That's in line with ACCC directives, to be fair, but if 25/5 is superfast, what does that make the higher tiers? Hyperfast? HyperGlobalMegaFast? Let's not forget that while all this is going on, Australia is tumbling down the global speed index, not upwards, by the way.
So what’s in NBN’s future?
Ever been driving at 110kph down a highway only to hit a town and have to drop to 60kph? Suddenly, it feels as though you’re crawling, even though if you were walking next to that same car you’d feel their speed quite intensely. What happens there is that you very much get used to a certain speed being both normal and acceptable. Shifting downwards isn't what you want to do. If anything, faster seems even more desirable. That's what I suspect will happen with consumer uptake of NBN speeds as well.
As users get accustomed to what can be done with existing 12/1 and 25/5 connections, and how they can push those boundaries. Speeding, if I really wanted to torture that car analogy once again.
As services from 4K video streaming to more interconnected government services or e-health become more commonplace, there will be a shift towards faster plans. It may take a couple of years, but it will happen, and that may provide the inflexion point that nbn needs in business terms.
The question is to whether nbn can convince folks to switch fast enough for its business purposes, and whether the middle-man ISPs can provide services that are stable enough on its network to meet those expanding consumer desires.
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