nbn™tries to ease peak hour crunch with cheaper bundles

50 Mbps / 100 Mbps now bundle CVC capacity

nbn™ has announced new wholesale bundles it hopes will overcome the despised peak-hour crush: a 50 Mbps access product with 2 Mbps of CVC traffic in the bundle; and a 100 Mbps access product with 2.5 Mbps of CVC.

The 50 Mbps product has a wholesale price of AU$45 per month, and the 100 Mbps product is $65 per month. nbn™ said this represents discounts of 27 per cent and 10 per cent, respectively, compared to the cost of buying the access connection and CVC connection separately.

The new wholesale products also allow RSPs to buy additional CVC capacity at the also-discounted $8 per Mbps per month, 40 per cent lower than the existing products (which average at $14.40 per Mbps/month).

It should be noted that these 50/100 Mbps products are in addition to products already on the nbn™ price book. There's also a cheaper entry-level bundle, telephony and 12 Mbps for $22 per month.

nbn™ CFO Stephen Rue also said the company is conducting ongoing industry consultations over its price structure, so further announcements can be expected in 2018.

+Comment: The Connectivity Virtual Circuit (CVC) delivers traffic from nbn™'s 121 points of presence (POPs) to the retail ISPs' (RSPs) infrastructure. It's one of the most controversial aspects of the National Broadband Network, and has been blamed for the network's peak hour crush, because RSPs trying to stay profitable squeeze their backhaul bandwidth.

However, it's contentious how much impact the new products will have on users, particularly in the longer term, as newly-installed Internet Australia chair Dr Paul Brooks (a greybeard of the industry who's been involved in startup ISPs in the pas) told Vulture South.

In getting to a point where the capacity crunch became an issue for the NBN, RSPs have repeatedly suffered from the interaction between the “Netflix effect” and their CVC provisioning. An ISP buying capacity today, and selling a product at a fixed price point (for example, $65 per month), will find demand on their CVCs rising, but not their revenue.

In short: traffic peaks are getting more “peaky”: Instead of doubling during peak hour, Dr Brooks said, in large markets traffic triples (in smaller markets, the burst can be even greater).

IX Australia, the non-profit that operates Internet exchanges around the country, publishes this chart of daily traffic between ISPs who peer at their locations:

IX traffic chart

IX Australia's traffic aggregates: yes, that's the Netflix effect you see

In the two largest states, NSW and Victoria, the difference between minimum and maximum traffic is more than three times (South Australia's peak is 11 times its trough).

That's the peak that's bruising the ISPs: the question is how much the price cut changes the game for them, and Brooks believes that CVC prices remain too high (for example, the discounted extra capacity at $8 per Mbps per month).

“You can buy capacity from Australia to Singapore at $3 per Mbps”, he told Vulture South, and “you can buy a leased line from a wholesale provider across the country in the order of $1-$3 per Mbps. NBN CVCs are artificially too high, and that's why RSPs are not buying enough.

“The CVC pricing bears no relation to the network cost of providing the transmission that represents” he added.

That's common knowledge throughout the industry. With the CVC network built (that is, the fibre connections between the 121 POIs), the marginal cost of bandwidth growth is very low. Increasing the capacity is a matter of upgrading the endpoints that need it.

The network is built that way as a way to recover the cost of building the NBN; changing the CVC charge means that cost has to be recovered somehow (nbn™'s CFO Stephen Rue told yesterday's press briefing the company remains committed to reaching its ARPU targets in the long term).

Contention

Vulture South was also curious about whether 2/2.5 Mbps per user would keep the packets moving, when those users are on notional access speeds of 50/100 Mbps.

Surprisingly, Dr Brooks' answer is “yes”.

It's all about how many heavy users are downloading at the same time, and that's surprisingly low. Dr Brooks said currently, averaged across all users, the average uncontested throughput of the NBN is a mere 1.3 Mbps.

Growth is, and has been, the problem – if you built your service four years ago assuming a per-user average of 750 Kbps, 1.3 Mbps is already causing you pain, and that 1.3 Mbps today will grow at 30 per cent per annum.

“It'll be 1.5-1.6 Mbps per user next year, and 2 Mbps per user after that.”

Looking at it another way: back in the days of dial-up or early ADSL, an ISP might provision their network on the basis of 75:1 – that is, for every 75 megabits of user packages sold, on the inside, network engineers only built 1 Mbps.

The 2 Mbps / 50 Mbps and 2.5 Mbps / 100 Mbps bundles are between 25:1 and 40:1 contention ratios, which Dr Brooks told Vulture South is better than current utilisation levels, since even in peak periods, many lines are idle. ®

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