Fibre networking at an NBN Point of Interconnect

NBN: Dimension-based CVC explained

Price signals to more high capacity plans and less network congestion

The NBN pricing discussion has hit full swing again.  The company responsible for building the National Broadband Network, nbn, has just pushed ahead with its proposed “dimension-based” discount on its controversial “Connectivity Virtual Circuit” (CVC) charge.

CVC is a virtual charge imposed by nbn to service providers in order to bring traffic from the “NBN network” to the service provider network (and vice versa).  This bandwidth is shared amongst all of the users on the same provider’s network aggregated at the 121 NBN points of interconnect.  You can read more about the threat of the CVC charge on nbn’s success here.

The newly introduced dimension-based discount sees greater discounts for service providers who purchase more hand-off capacity between the “NBN network” and the service provider’s network on a per-user basis.

The discounts being implemented will range from $0.50 to up to $6.00 per Mbps of CVC, depending on the average amount of CVC purchased per user.

Band-aid to solving two problems

Congestion

This discount is a very significant signal to service providers.

CVC “skimping” is a known problem for many NBN customers, whose Internet connection can grind to a halt during peak hours due to insufficient CVC bandwidth.  Especially with its widely unpopular Fibre to the Node network, NBN simply cannot afford to have negative perceptions about the performance of its network — whether it is provider-induced or indeed, NBN-induced.

This discount not only encourages ISPs to buy more CVC (reducing skimping and improving performance), it will also encourage ISPs to sell higher-speed or higher-capacity plans.  More on that in a bit.

But first — why will it solve congestion? Simply because in many cases, it is cheaper for providers to purchase more bandwidth (thereby decreasing congestion) than to retain their old per-user allocations.

Take an example service provider who provisions on average anywhere between 583 to 600 Kbps of CVC bandwidth per user.  It becomes cheaper for the provider to purchase more CVC than to use the existing bandwidth allocation:

CVC provisioned per user

CVC rate per Mbps
(with dimension-based discount)

CVC rate per user
(A) x (B)

583 Kbps

$16.25

$9.47
(same as 601 Kbps)

600 Kbps

$16.25

$9.75
(same as 619 Kbps)

601 Kbps

$15.75

$9.47

619 Kbps

$15.75

$9.75

Despite purchasing more CVC (601 to 619 Kbps), the CVC rate per user is either cheaper than or is equal to the old CVC rate thanks to the discounted rate.

Higher capacity / speed plans

This discount also encourages providers to sell more higher value plans.

A provider who exclusively sells low capacity plans will naturally have a lower amount of CVC-per-user provisioned.  This means their CVC discount is less, costing them more on a per Mbps basis than a provider who sells a more diverse set of plans.

In contrast, a provider who sells more high-speed or high-capacity plans will have a greater CVC discount. This allows them to sell all of their plans marginally cheaper than the exclusive low capacity provider, even if they’re allocating the same CVC per user.

Thus, providers who diversify and increase the customer base to have more high usage users will benefit the most from these pricing discounts.

So what’s the target CVC-per-user?

Looking at the price modelling, it’s evident that nbn is targeting around the 1 Mbps and 1.25 Mbps per user mark.  It offers the largest and most generous discounts at the 1150 Kbps mark, shaving a whole $1.42 per user by simply increasing the CVC-per-user by a mere 1 Kbps.

Reverse engineering NBN’s 2016 half-year results by combining ARPU and AVC speed tier breakdowns — we can estimate that the current CVC allocation per user across all providers is around 800 kbps.

Importantly, however, this excludes the initial 150 Mbps of CVC that NBN provides for free to service providers at each point of interconnect.

AVC Tiers (Mbps) Percentage (HY2016) AVC+UNI Cost (ex GST)
12/1

33%

$24

25/5

45%

$27

50/20

6%

$34

100/40

16%

$38

Avg AVC/UNI Revenue per user

$28.19

Price component Revenue per user per month
ARPU (HY2016)

$43.00

Avg AVC/UNI Revenue

-$28.19

Avg CVC/NNI Revenue

$14.81

Estimated Avg CVC^

~835 Kbps

^ excluding initial 150Mbps credit per provider per CSA. Assumes an NNI cost per user to be ~20¢.

Of course, the way that NBN constructs its product means that providers will always want to purchase more CVC. Whether or not they can afford it is another problem.

Going forward, NBN must maintain an open dialog with service providers to ensure that the pricing is adaptable to the bandwidth demands of Australians.  Whether it’s a complete rethink of the pricing structure or continual discounts — this pricing model is vital to the success of the network.

NBN technician splicing fibre in a van

DOCSIS 3.1 coming to nbn at the end of the year

Company to retrospectively replace end user equipment to enable higher speeds using new cable broadband technology

The company responsible for building the National Broadband Network, nbn, has updated its Integrated Product Roadmap — revealing that it will be upgrading its HFC network termination device (NTD) to the DOCSIS 3.1 standard in the fourth quarter of 2016.

nbn is still yet to officially launch their HFC product, which is still scheduled to launch in June 2016. Last month, the company revealed at a Senate Committee hearing that they still have not signed construction contracts for the HFC rollout and the initial launch will be limited to a pilot area in Redcliffe, Queensland.

Initially, nbn will utilise DOCSIS 3.0 technology to deliver services to end users. Since HFC is a shared medium, traditionally, cable networks have heavy congestion and severely reduced speed during peak hours.

DOCSIS 3.1 promises to increase capacity through increased spectral efficiency, thus easing congestion.

In-flight satellite consultation in June

NBN will also be consulting with its service providers over “a mobility solution” which will include “a wide range of applications” including in-flight Wi-Fi connectivity, emergency services and health and education.

This consultation comes as Qantas announced it will team up with ViaSat to trial in-flight Wi-Fi services by utilising the NBN satellites on select domestic flights.

Detailed analysis of the proposal conducted by jxeeno blog found it would likely have minimal impact to existing satellite congestion due to the short periods of time a plane flies over a particular NBN spot beam.

Enterprise satellite consultation in third quarter

Separately, nbn will also be consulting on the delivery of enterprise services over its satellites. While the roadmap provides no further detail on this consultation — at the last Senate Committee hearing, company executives had alluded potential use of NBN satellites in the defense department or other enterprise applications.

NBN Mobile Backhaul and TV over fibre delayed

Initially slated for launch in the first quarter of 2016, nbn has delayed the launch of the NBN cell access service (mobile backhaul over the NBN) and its inclusion of TV signals over fibre in new developments till May this year.

Lightning Broadband: what is this shenanigans?

Is this supposedly magical wireless technology really going to supersede the NBN?

Over the recent weeks, a company branded as “Lightning Broadband” has been making waves in Australia.  It’s claiming that for $120 per month, it can deliver an unlimited 100 Mbps connection to residents using its wireless network.  But exactly how does the company plan to build its wireless network?

If you read the “technical explanation” on its website, you’ll realise that it doesn’t make sense.

The company is claiming that it uses fibre to connect to their DC.  It then says DC, in that case, means a DC-HSDPA (effectively 3G technology).  In the following paragraphs, it then goes on to explain that it doesn’t use HSDPA — but rather 24GHz microwave backhaul links followed by 802.11ac over the 5.8GHz band for the final hop to the customer.

However, if you read between the lines and interpret DC as its usual meaning of a data centre, it makes more sense.  The company is effectively using the fixed 5.8 GHz band to transmit a Wi-Fi signal to the end user.  This removes the need for hefty mobile spectrum licences that typical carriers like Telstra, Optus and Vodafone pay to secure their spectrum slice.

How much bandwidth does that give?

In Australia, the majority of the 5 GHz band can either only be used indoors or is subject DFS (Dynamic Frequency Selection) as this band has potential to interfere with radar signals.  The 5.8 GHz slice (5745-5825 MHz) is the only band that doesn’t have these limitations and is what Lightning Broadband is claiming to use.  This effectively gives a single 80 MHz continuous band for the last mile transmission.

The leading data rates and speeds of the 802.11ac standard (256-QAM, MCS 9, Guard Interval of 800ms) gives a maximum theoretical throughput of 390 Mbps.

As for real world performance?  One of the leading “point-to-point” Wi-Fi hardware providers, Ubiquiti, claims its NanoStation M5 (5.8GHz) Wireless Bridge & WiFi AP can deliver 150 Mbps. With a beamwidth of anywhere between 42 and 60 degrees, you’ll have to share the same 150 Mbps bandwidth with everyone on the same sector as you.

Not exactly lightning speed as soon as you have a dozen or so people on the network during peak times — especially when you’re selling an “unlimited” plan.

Nonetheless…

Lightning Broadband has nothing to worry for now. It’s not intended to be a mass-market product, with large number of customers. The spectrum bandwidth simply won’t support it (because, physics). But kudos to them for the concept and to help consumers get connected while the NBN is still rolling out.

At the end of the day, it can only exist in very specific areas — outer metro areas with a tall building with a willing management who will let you install your equipment on the roof. But as soon as you have some other company else do exactly the same thing in your area, you’re screwed.

This type of technology has been used for years by regional and rural folks to relay mobile broadband from a shed to get a decent mobile signal.

So no, this is not going to make the NBN redundant. But it’s a good interim solution to help a small number of users get connected while it’s still being rolled out.