NBN Just Got Easier For Small ISPs

In light of recent comments from Internode managing director Simon Hackett, in which he questioned the ability of the AVC/CVC pricing mix to allow for smaller ISPs to compete on a national level under the NBN, comes news today that Nextgen Networks are planning to deliver a wholesale product that would eliminate his concerns for any ISP adopting their solution.

One of Hackett’s main concerns was that the high number of “Points-of-Interconnect” (POI), currently slated to be 121 in the ACCC-approved model, rather than the 14 POI model he and NBN Co were initially in favour of, would place unnecessary financial burden on ISPs – particularly the small ones – when connecting backhaul to each POI.

The smallest ISPs, he feared, would never be able to compete on a national level, with the cost of providing backhaul to 121 locations obviously being far greater than the costs of providing backhaul to 14 locations.

While this is certainly a valid point of view with considerable merit, when looked at from the other direction, I don’t believe that it is quite so clear cut.

The NBN is designed to cover approximately 12 million premises by the time it is completed in about 2020. A solution based on 121 POIs means about 100,000 premises (on average) need to be covered by each POI. Under the 14 POI model, approximately 850,000 premises need to be covered by each POI.

To cover every premise in the country, the debate gets down to one of more backhaul links with lower capacity requirements, or less backhaul links with higher capacity requirements – an interesting conundrum which in my opinion, has no truly right or wrong answer.

The main reason the ACCC went for the higher number was to protect existing infrastructure from being “stranded” and unusable within the NBN as a whole.

The less POIs you have, the more likely that a single existing link is nowhere near any of them, and that it becomes useless – destroying the investment the owners of that link have made in establishing it.

Fair enough that that is largely protected.

I have stated in the past that I think 121 POIs is too many, and that 14 is too few, and that I believe a “better” number is 66 – (the total number of call collection areas within our current network infrastructure) – and which should closely match existing assets.

Nevertheless, 121 is the number we have.

The concern was that small ISPs wishing to compete on a national or even regional level, wouldn’t have the financial capacity to do so, given the costs of getting the backhaul up and happening.

What Nextgen have done today is eliminate that concern, with their “NBN Connect” product seeking to address the problem by choosing to wholesale access to the entire NBN – (through all 121 POIs) – through as little as a single connection into the Nextgen network.

Small ISPs can access as much of the network as they require through that single connection, through what is effectively a single “POI”.

The backhaul question is gone.

Yes, the small ISPs will still need to pay for access based on volume and how many POIs they want to access, but they won’t be struck with the cost of setting up and maintaining 121 – (or indeed any) – backhaul links – relying instead on existing infrastructure Nextgen has in place.

It will be an economy of scale that will be very attractive – and not just to the really small players in the market. Some of the mid-size ISPs may see it as a cheaper, less headache-prone path towards NBN connectivity as well, with Nextgen taking care of the “hard part”.

This is the sort of market shift that the government was hoping to stimulate in the new telecommunications landscape in this country – and Nextgen are the first to throw their hand up with a solution.

They shouldn’t be the last.