nbn™ blames cheap-ass telcos for grumpy users, absolves CVC pricing

All this will pass says CEO Morrow, once ISPs consolidate and stop discounting

nbn™, the entity building and operating Australia's national broadband network (NBN), has hit back at critics of its network and business plan in a pair of missives attributed to CEO Bill Morrow.

The company has faced increasing criticism in recent weeks as users complain that their services are either unreliable, underwhelming or some combination of the two. Murdoch mouthpiece The Australian has run a grump-a-day campaign alleging this would never have happened if nbn™ had build the fibre-to-the-premises network it campaigned against a decade back. Internet Australia continues a long campaign in which it insists that copper has no future, other than in short runs as part of a fibre-to-the-distribution-point build that could see twisted pairs used for longer distances than is the case for fibre-to-the-node connections.

Morrow has previously let it be known that only 15 per cent of customers are disappointed and said he feels that's a regrettable but not-unacceptable number.

Now the CEO has blamed nbn™'s retailers, accusing them of making a “land grab” for customers at a time tens of thousands of premises become able to connect to the NBN each month. In a blog post Morrow says the “land grab” has sparked a “price war” that sees carriers “cutting corners on quality to save on cost” to develop competitive plans.

Morrow argues that the key “cut corner” is the Connectivity Virtual Circuit (CVC), the wholesale charge that covers traffic between a retailers' network and the NBN. Morrow says around $5 a month per user would be enough to double the amount of bandwidth offered to each user.

nbn™ also invokes the Australian Consumer and Competition Commission's (ACCC's) ongoing efforts to have advertising for broadband services accurately describe the speeds punters will experience at peak times. In a more detailed primer on the CVC (PDF) he finds fault with carriers' promotions because “seldom do you see any clarity around speed options or quality during the peak time of day.”

But the CEO also mentions a recent opinion from ACCC Chair Rod Sims in which he said Australia can probably sustain five major broadband providers. Morrow points out that in Sydney alone, more than 100 entities market NBN connections and that in such a hyper-competitive market price wars make it hard for competitors to find a profit margin while offering a decent product.

Carriers, he says, are left deciding “to either forgo profit, forgo market share, or forgo high service levels, including optimal speed during typical peak traffic times.”

The CEO also spends a bit of time justifying the CVC's existence, for its role helping nbn™ cover its operating costs and therefore allowing it to repay the loans Australia's government took out to find its creation.

“Even if we reach our planned 70%+ take up rate, nbn’s current revenue per user coming from the RSPs [retailers] will not generate enough total revenue to produce a positive return on the investment made to build the network as it is planned,” he writes.

Morrow is right to point out that telcos control the amount of CVC they purchase and therefore have a fair degree of control over the end-user experience. But he omits to mention that Australia's government decided nbn™ should not seek private sector finance and now expects it to pay interest at commercial rates rather than the almost-certainly-cheaper rate offered to governments. Morrow has already hinted that a change to the CVC would make rumblings about the NBN go away.

By again pointing out that CVC has to be at current levels to ensure ROI, he therefore dangles the prospect of a governmental response to poor broadband user experience being a willingness to accept lesser rates of return from nbn™. There's little sign Australia's cash-strapped government, unable to convincingly control recurring deficits, has any appetite for such a change. And that's despite it being a pro-business government that is far from ideologically averse to private profits.

Hence, perhaps, Morrow's hints at industry consolidation being necessary.

nbn™ has also steered this conversation away from its own network configuration. The Register does not believe that the final connection medium is the ultimate determinant of end-user experience. But whether nbn™'s backbone build contributes to retailers' woes is largely unexplored country. ®

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