Why NBN Co Is Wrong About Gigabit Broadband

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Last week, NBN Co CEO Bill Morrow took a beating for claiming Australians won't use a gigabit broadband service, even if it was offered for free. He hit back at his detractors with a lengthy opinion piece, explaining his position. We take a look at some of the arguments he made and breakdown why they are flawed.

It's not the first time Morrow has said that there's currently very little demand for gigabit services. Here's what he said last year at NBN Co's full year results presentation:

"The thing I want to point out is that we did some research of companies overseas — Google, Comcast, AT&T and so on — to ask about their Gigabit per second services and asked whether there was a lot of uptake. The answer was no, but they offer them as a market competitive element."

He echoed this sentiment again at this year's NBN Co Half-Year Results event… and put his foot in it when he uttered this statement:

"Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway ... we know there are things on the horizon that are going to increase the need for further demand.

Naturally, people got angry, hence Morrow's opinion piece response. Here is a list of his key arguments and why they fall short.

Argument #1: People Don't NEED a 1Gbps Connection

Now, you can't dismiss some of his claims, especially the one about how 83% of people on the NBN are opting on broadband services based on the lower wholesale speed tiers. That's just a fact. He also pointed to meetings with global operators offering 1Gbps services that said end-users aren't really taking full advantage of them.

"Even in a heavy usage household right now it’s likely you’d struggle to generate the need for anything close to a 1Gbps - if you had five 4K TVs streaming 4K movies simultaneously then that’s only around 100Mbps being consumed - leaving 900Mbps idle," Morrow said. "Given that the vast majority of current online video viewing is in SD or HD - requiring only 2Mbps-5Mbps then a 1Gbps pipe would be enough to stream 200 HD streams simultaneously - way, way beyond the requirements of a normal household."

Again, he is right. But there's no denying there is definitely a future need for 1Gbps connections. As IT analyst firm Deloitte notes in a 2016 report:

"A Gbit/s Internet connection might appear frivolous, but a decade ago some commentators may have questioned the need for a touchscreen-based device capable of transmitting data at 150Mbit/s, with storage for tens of thousands of HD photos, video quality sufficient for broadcast…, secure fingerprint reader, and billions of transistors within a 64-bit eigh core processor. Yet modern smartphones with this specifications are likely to sell in the hundreds of millions of units this year.

While a Gbit/s connection for a single device or a single application may be overkill, consumers are likely to continue accumulating connected devices in the long term."

Morrow had said NBN Co will look to accommodate for applications that demand higher speeds than what is currently being offered on the NBN. But the NBN in its current form has long been criticised for being challenging to upgrade in the future. NBN Co's adoption of FTTdp in some rollout areas is encouraging, but the company is still predominantly working with inferior FTTN technology.

Also, even if 1Gbps is a bit of an overkill for the average consumer, a readily accessible superfast broadband connection like that would be a boon for small and medium businesses. It would enable them to launch digital services and compete at a global scale more easily.

Argument #2 A 1Gbps Service Would Cost Too Much

Morrow said that while city states like Singapore and Hong Kong can afford to offer 1Gbps connections for as low as $49 per month, such prices are impossible in Australia since the capital cost of building the NBN is much higher.

"The NBN network is costing around $49 billion to build - and we need to recoup that cost - given that our business model is split between driving revenues from access and consumption charges, we simply cannot match the kind of 1Gbps pricing on offer in markets like Singapore and Hong Kong.

Morrow also noted that NBN Co already offers a wholesale 1Gbps product to internet service providers (ISPs) that can be made available to more than 1.5 million homes. So far no ISP offers 1Gbps product to the public.

"This is, in our opinion, because there is still minimal consumer demand for these ultra-fast speeds – especially at the prices retailers would have to charge for them," he said.

What Morrow failed to address is that the way NBN Co charges ISPs for NBN services is based on consumption through what is called a connectivity Virtual Circuit (CVC) charge. This makes it cost prohibitive for ISPs to offer faster broadband speeds.

As for Morrow's statements about how the high capital costs of building the NBN and needing to recoup the money, the fact is the company is building a network with short-term goals. It's already splashing out a lot of money on a predominantly FTTN network that is likely to become obsolete in the near future. Then more capital costs will be incurred when the network will need to be upgraded. Why not just do and it once and do it right? Because, politics.

Argument #3 We Can't Compare Ourselves with Other Markets

"For a variety of reasons, our broadband upgrade in Australia started much later, so we cannot judge ourselves against markets like these; they are much further along on their journey and you just can’t compare Australia to Singapore or Hong Kong for obvious reasons including those stated above," according to Morrow.

Well, can we at least try to catch up with those markets more rapidly? We are currently moving at a snail's pace on the broadband front.

Customers on NBN's FTTP footprint may enjoy up to significantly better download speeds but those in FTTN areas have been complaining for ages that they're getting ADSL2+ equivalent performance from their connections.

Even NBN Co's own advertisements shows a futuristic Minority Report-esque version of Australia, but that's unlikely to become a reality with our mediocre broadband connection speeds.


What do you think about NBN Co CEO Bill Morrow's justification for why we don't have 1Gbps broadband yet? Let us know in the comments.

NBN Rethink: Why We Need 'Fibre-To-The-Driveway' Right Now

Ever since the Coalition government came into power and declared it will use the fibre-to-the-node (FTTN) model for the National Broadband Network (NBN), experts and vocal technology-conscious citizens have been up in arms about it. But the argument against FTTN has been mounting for years. Faced with overwhelming evidence and new technology alternatives, the Government can no longer ignore that their NBN vision is short-sighted. They need to act now instead of dooming us to an archaic broadband network just to save face. Here are four reasons why fibre-to-the-distribution point (FTTdp) needs to be adopted for the NBN.

Read more

WATCH MORE: Tech News

Comments

    This is a farce. We can't get any substantial data allowances as members of the public due to the nbn fair use policy however they can sell huge amounts of bandwidth to Qantas... money talks.

    Everyone thinks they're wrong, except for the politicians, and the idiots that bend over for them.

    83% of people on the NBN are opting on broadband services based on the lower wholesale speed tiers.

    I opted for the 50/20 tier only because I was (correctly) told by my ISP that FTTN in my area would max out at around 35-40Mbps. If I had a choice in the matter I would pay the extra to go to the 100/40 tier or higher if it was available, so my "decision" was actually made by NBN co when they decided FTTN was a suitable alternative to FTTP.

      Your simple explanation is something that Bill Morrow refuses to acknowledge.
      In that respect he is misleading the Australian public.

      I think the 83% figure is partly due to informed users like yourself, but most likely largely due to uninformed mum and dad customers who get their flyer in the mail, or a message from their telco saying they can switch, or have to switch, then just doing so no questions asked.
      There's plenty of those out there who wouldn't even realize that there's different speed options or technologies when it comes to delivery of the service, thus would just assume "It's NBN, it must be faster!"
      $59/mth for unlimited data sounds like a great deal, until you investigate the information buried deep in their sites, only to find out that's for a 12Mbps connection!
      I pay $49 a month atm for my adsl, and I can get 14Mbps. I couldn't help but LOL when I found they wanted me to pay $10/mth more for something slower!
      I have signed up for NBN though, and am awaiting my install, but thanks to shopping around, I'll be getting 100/40 for $59/mth with unlimited data. (Going to be HFC as that's my only option. Hopefully it'll give me reasonable speeds until DOCSIS 3 gets implemented. Heard mixed results from people. Some able to get 70-90, while others only seem to be able to get 25-50. I'm close to my exchange though, so fingers crossed!)
      I feel sorry for the people who don't know much about how it all works. I doubt all the ISP's will be explaining the differences to most people unless they specifically ask, and instead they'll just get burned.

      Last edited 16/02/17 11:43 am

        I get that you, me and the majority of people who visit sites such as this are skewed towards wanting higher internet speeds. We are interested and intellectually/emotionally invested, whereas the Mum and Dad customers are perfectly happy to get whatever they are told to, as long as the price is right.

        But basing the future of our infrastructure on these types of customers is shortsighted. Current teenagers will, in 10 years time, be moving out of their family homes and their needs are likely to not be the same as the previous resident of their new house. Will they be happy with the substandard speeds based on the habits of some of today's users? And when the digital TV and radio spectrum is one day re-purposed and this content is only available through an internet connection, are the customers on lower speed tiers going to suffer with a slower connection when more of their life is going through it or will they opt for a higher speed?

        Hopefully there is some thought into the needs of future rather than current Australia before it is too late, but I doubt it...

          The govt have a terrible track record when it comes to planning for the future. Never do anything until they're essentially forced to. I mean, in 2006, I did a rollout for dept of Immigration, where we rolled out XP! 5 yrs after it was released! Meanwhile the private sector had planned, tested and implemented and had it well established for years!
          I'd be willing to bet money that there's still XP machines in govt departments even today! ;)

      Why would anyone pay for a higher bandwidth if you're not guaranteed to get any of it? it'd be like paying for a tank of fuel and you 'might' get 3/4 or maybe 1/2. ffs.

        Exactly, that would be crazy! But now I'm part of the 83% that supposedly does not want faster internet.

        Yep. It's why ACCC needs to start telling RSPs that "up to" isn't allowed. It must be changed to "at least".
        Then the RSPs would have to ask Bill Morrow exactly how his FTTN is doing.

        Last edited 17/02/17 10:58 am

    Let me burn a few straw men:
    1. "Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway"

    Where did they find examples of Gigabit plans being offered for free and people not taking them up?

    2. "we simply cannot match the kind of 1Gbps pricing on offer in markets like Singapore and Hong Kong."

    No, not if you're looking at the NBN Company as a non-government organisation required to make a month-to-month profit. But if it's a government entity (like it is), then it can make a loss permanently as long as it's for the greater good of the country that it's serving. If there are intangible benefits to the economy like, say, competing on an international scale in terms of electronic services delivery maybe...

    Also, who in their right mind would try to compare Hong Kong and Singapore to Australia in anything? It's like comparing the acceleration and handling of a Ferrari to that of a Holden, when the argument should be about their suitability to Australian road conditions.

    3. "For a variety of reasons, our broadband upgrade in Australia started much later..."

    One reason: The Libs privatising Telstra and turning it into even more of a profit-hungry machine than it used to be and without splitting it into Wholesale and Retail arms so as to avoid at least some amount of competition crippling monopolisation of the market it was gifted.

    Another reason: The Libs didn't even want to do THIS broadband upgrade, Malcolm Turnbull has stated as such: "Labor’s biggest mistake with the NBN was establishing a government owned start-up company to build the largest and most complex infrastructure project in our history."

    Malcolm, true to the mindset of conservative governments, would have left broadband infrastructure in the hands of "the market" they so love. I believe that's the market that resulted in this quote: "our broadband upgrade in Australia started much later..."

    4. "you just can’t compare Australia to Singapore or Hong Kong"

    Bill, and it pains me to bring this up in front of your peers, but you were the one who brought the comparison up in the first place. It was obviously convenient for you then, but it isn't now. Don't try that, we're too smart for that.

    Major flaw in Morrows argument that the fast speed would not be taken up.

    If that is the case, just give the fast speed to everyone. It shouldn't make any difference to the NBN if no one out there needs to use it. If I use one device to stream a movie at 3Mbps then that is how much data I will use.

    The NBN would never do as I suggest, because they want to charge extra for a higher speed connection. So according to the CEO of the NBN they are trying to sell us something that they have stated we don't need. That must be a case for the ACCC.

      Please do not worry about fast NBN because under new legislation the government is planning on blocking out our access to the Internet completely as it will be one of the directives to stop our young people from being radicalised

    This is seriously one massive stuff up,massive..
    How can it be fair or justifiable to the taxpayer us connecting some via FTTP n some FTTN? & expect that that will be ok within the community.. Who the hell is morrow to predict wats ok for my connection n wats ok for someone else? This is upmost totally UNFAIR TO THE CONSUMER but most importantly WRONG THE WRONG WAY IMPLEMENTING THIS EXCITING NEW INFRASTRUCTURE THAT WE SHOULD ALL BE EXPERIENCING AT THE SAME LEVEL..EQUAL.. Ok.
    It is not right & I'l say undeniable NOT FAIR BY ANY STRETCH OF COMPENSATING SOME TO SAVE MONEY NOW.. At the end why the fuk would you do it FTTN in the 1St place to save money why? when your gunna end up having the bloody same result as before when it was ADSL there's ur waste of money there n then u dumb cunt. Seriously don't even bother doing FTTN please u being the biggest idiot.
    I can go on but I'm that pissed off at all of this it's become a joke n all our political systems politicians can go n get fkd mate. Got no idea wat is good wat is right for the people anymore jus for themselves arsholes hope morrow n the lot choke on their ridiculous lame shameful ideas they have for our future interests.

    I signed up for a 100/40 service but during peak times the speed drops to low single digits due to congestion for cvc reasons. Same for a friend. Service provider recommended dropping to a low speed tier as that would be closer to what was actually being delivered when it was required. No wonder so many people are on slow speed tiers. It's all they will actually receive.

    Difficult to argue with ignorance, especially when it is all about the dollar.
    Another Dill put in charge, of a Malcolm legacy.

    I pay for more speed now so I'd be happy to pay more for NBN @1Gb

    This blokes a tool the only reason most ppl are on. 12Mb is cos it's a standard connection but for ppl that know they don't want that crap.. my ADSL 2 tops out at 21+Mb all day (Small town close to exchange) unlike some of my friends that only get 8Mb cos there in a large suburb and a good distance from the exchange.. I'd say most ppl don't know the difference IE if they bring out wireless NBN here @25Mb I may as well stay on ADSL 2 as I have a good connection now but if I was in melton let's say and was on 24Mb n only getting 8 the standard nbn would look and feel better but as I know it's slow in melton due to distance and population I'd opt for a high speed plan than the standard. How many ppl really understand this side of there internet.. not many imo

    I was one of those people that "opted" for 12/1mbps - as that's all I can afford and adsl2+ is no longer an option in my area. Would I like faster internet? Heck yes, my previous adsl2+ was faster AND cheaper! This premise is FTTN and max speed this house can get is 26mbps.

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