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2015-11-24

Netflix Stan Presto

"Broadband TV" challenge needs urgent attention, Ziggy says

The rapid uptake of streaming video services such as Netflix poses serious challenges to current policy settings, including NBN investment and pricing, according to participants at a recent industry conference.

nbn Chairman and former Telstra CEO Ziggy Switkowski told the Communications Day/ Communications Alliance NBN conference that the availability of over-the-top video services was making current cross-media ownership rules obsolete while at the same time posing questions about the drivers of infrastructure investment.

These are not issues that have appeared overnight. But the exponential growth in data usage associated with the appearance of services such as Netflix, Stan and Presto is bringing them into sharper focus.

Average download volumes of NBN users have almost doubled over the last 12 months, rising from about 65 GB per month this time last year to an average 110 gigabytes per month as of September.

Zwitkowski said that nbn expected that by 2020, when the network is scheduled for completion, 80% of its traffic would be video, mostly for residential entertainment. So how will the increased network capacity needed to meet such consumer appetite be paid for?

What will be the rationale and incentives for future nbn investment and what, it might also be asked, should be the role of the taxpayer in the funding mix?

Meanwhile, on the other side of the infrastructure/services split, nbn’s retail customers (Retail Service Providers) continue to clamour for lower usage charges as traffic volumes rise.  

The politics of the NBN project has always meant that connection charges would be kept low (roughly in line with current wireline rental charges) and network costs would be largely recovered from RSPs through volume-related usage charges. 

Even before the appearance of Netflix in the Australian market, RSPs were claiming that these charges were too high – sometimes up to 4 times as much as a wholesale ADSL service, for instance. Now with RSPs scrambling to buy extra capacity to meet customer demand, the cost problem threatens to become more acute.

The NBN project appears to be at last gaining some momentum, with 1.3m premises now able to connect to the network and a further 700,000 under construction. It is difficult not to feel, however, that its pricing and hence long-term cost recovery problems are, in practice, only just beginning.

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