Why No Aggregated National Port Option From UFB/NBN?

As an ISP there are a couple of ways to pick up tail circuits from carriers in NZ and Australia.

The first is a region specific handover. If the client is located in Queensland, a carrier may state that you must accept handover of that circuit on to your network in that same state. Telstra Wholesale (Australia) currently operates with this model for most tail circuit types.

The second is a national aggregate port, where regardless of where an end user is located, an ISP can have that circuit handed off to them anywhere that they have a point of presence. Two examples of this are Chorus with their EUBA/WVS (VDSL) handoff, or AAPT in Australia. In these cases an ISP can choose to have as many or as few hand-offs as they like. The trade-off is that the further a circuit is away from the handoff, the greater the circuit cost.

In Australia Telstra Wholesale recently announced plans to provide ISP’s with a single national aggregation port (should be released in early 2013), this will be a big shift from the current practice of handing services off on a state by state basis. Carriers such as AAPT have provided a national hand-off for a long time,  so this move is nothing more than Telstra meeting the market, but given they have the biggest network in Australia, the move will give smaller ISP’s direct access to their network and take a lot of steam out of the 3rd party aggregator market.

The UFB and NBN networks have been designed with regional hand-offs, the NBN has 121 point of interconnects and the UFB network has 33. ISP’s or retail service providers (RSP’s) must set up a point of presence in each region within which they wish to connect clients to their network. The result of this model is that many ISP’s do not have the required number of customers in smaller cities or non-metro areas to justify deploying their own equipment and extending their network, meaning that buying tier 1 services of a tier 2 re-seller becomes the only option. This option results in the RSP’s pricing being out of step with market expectations, especially when the tier 1 wholesale rates are in the public domain and readily accessible online.

Where carriers such as AAPT provide a single national aggregate port, let’s say it is located in Sydney, the cost of bring a circuit back to that port from Brisbane is added to the individual tail circuit price, making it slightly higher than would be the case if the same type of circuit was brought back to Sydney from elsewhere in NSW, but this option keeps the tail circuit far less expensive than would be the case should an RSP purchase the same circuit from a 3rd party aggregator.

Where the UFB and NBN models fall down, and what will result in a number of smaller regional ISP’s disappearing from the market, is that while small RSP’s have access to the same tail price as the large RSP’s, the circuit price is only one of a number of costs incurred when accessing these government sponsored networks. If an RSP can’t afford to extend their network in to a given region, they won’t have the same purchase price as the bigger ISP’s, and while this isn’t new, the uniformity of service options nationwide means that within a year or two businesses everywhere will expect the same services at the same price points across all of their office locations.

If Crown Fibre and NBN co had developed an aggregate national port option for ISP’s/RSP’s to use as they extend into new regions, or at least kept the number of points of interconnect to a minimum, they would have enabled greater competition through granting lower cost access to smaller players. Given both the New Zealand and Australian governments are looking for a speedy uptake of the UFB/NBN services, why didn’t they make access options more user friendly for RSP’s? The fact is that only big ISP’s are listened to during industry consultation, and regional hand-offs suits them just fine as it enables them to utilise existing infrastructure, build a market around inter-region backhaul, and keep smaller players at bay.

Brendan Ritchie

 

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