Is NBN Co’s chief executive right when he says Australians aren’t interested in ultra-fast broadband?

By David Glance, University of Western Australia

Whilst announcing NBN Co’s 2017 half year results, chief executive Bill Morrow stated that there was little market demand for faster broadband speeds than the 100 megabits per second (Mbps) being currently offered on the NBN.

Morrow made the remarks after being asked when internet service providers (ISPs) would offer internet connection speeds of one gigabit per second (1 Gbps).

Morrow replied that there are currently 1.5 million homes that can have 1 Gbps connections and that although a “couple of the retailers have signed up for a trial” of these speeds, nobody as yet has offered the service to consumers. Morrow presumed “it is because there isn’t that big of a demand out there to actually develop a product to sell to those end users”.

More contentiously, Morrow stated about customers’ interest in 1 Gbps speeds: “Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway”.

Morrow clearly sees that this situation may change with the advent of augmented reality and 4K and even 8K television, but that these technologies are not being adopted in any great numbers yet.

It is worth clarifying that when reporting this story, journalists have used the term “super-fast” to refer to the 1 Gbps speeds Morrow was discussing. However, superfast is a term that the Australian Competition and Consumer Commission (ACCC) defines as any broadband over 25 Mbps. Somewhat more confusingly, NBN uses the term to refer to 100 Mbps, but not the 50 Mbps, connections. Perhaps a better description for 1 Gbps internet broadband would be “ultra-fast”?

Returning to the original statement by the NBN Co chief executive, are Morrow’s claims that Australians are not interested in 1 Gbps internet connections in fact true?

So far, the bulk of NBN customers are opting for speeds of 25 Mbps or less. By the end of 2016, 83% of fixed line NBN customers and 96% of fixed wireless customers had internet services of 25 Mbps or less. Only 13% of fixed line customers had opted for the 100 Mbps connections.

The difference in cost between a 25 Mbps plan and 100 Mbps is $15 a month from Telstra and $30 a month from iiNet. The cost of a 100 Mbps connection is not excessive compared to the slower plans. Customers at this point simply see that for what they use the internet for, 25 Mbps suits their needs.

For the moment, 25 Mbps is just about enough to stream a 4K Netflix show. However, there aren’t that many movies or TV episodes on Netflix available in 4K and even if there were, a bigger factor is the download size of these shows.

Streaming 4K results in a use of about 7 GB per hour. Given that the average Netflix user is watching about two hours a day on the platform, this would result in about 420 GB per month.

The starting plan that Telstra provides only allows 100 GB per month and so this would be the determining factor for people streaming at 4K, rather than speed. Even the higher cost plans only provide one terabyte (TB) of data and this would not be enough for streaming 8K or even newer enhancements to video such as high-dynamic range video (HDR).

It is important to note that it is not the NBN that is determining the ultimate pricing on packages that the ISPs offer. iiNet offers unlimited downloads, for example.

Critics of NBN Co like Internet Australia’s chief executive Laurie Patton have argued that despite what customers may want today, the network should be being built that will support the needs of future applications and capacity. Clearly if applications do arise that need the Gbps speeds, not having a network that can support those speeds is going to prevent the adoption of those technologies.

The difficulty with this line of argument however is that those applications don’t currently exist, especially those that can’t run on 100 Mbps speed connections; 4K or even 8K TV is not on its own, a sufficient argument to justify that need. Although Morrow mentioned that applications like augmented reality and artificial intelligence may boost demand, it is really not clear what these applications would be and why they would need the higher speeds.

There is nothing stopping people currently on the NBN, or even on Telstra’s existing HFC internet network having 100 Mbps broadband that would give them the capability of streaming 4K easily. Given the relatively low take-up rates of that higher speed, one would have to believe Morrow’s assertion that there isn’t enough market demand to make it worth the ISPs’ while.

Having little market demand for something is not the same as there being no demand for a product. I personally would opt for 1 Gbps because I currently get relatively fast downloads from a 100 Mbps HFC connection from Telstra. Being able to download movies, software updates and other files in even less time would be something I would be prepared to pay extra for. More importantly, having the extra upload speeds would allow me to make more use of cloud-based backups.

There does seem to be an opportunity to educate the market about the benefits of the higher speeds that would presumably be in the interests of the companies making money from selling these plans, including NBN Co itself. If there is little demand for 1 Gbps internet connections, it is possibly time for NBN Co and its retail service provider customers to do more to create it?The Conversation

David Glance is a director of UWA Centre for Software Practice at the University of Western Australia

This article was originally published on The Conversation. Read the original article.

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5 years ago

Morrow is a goose. The reason why consumers haven’t taken up the upper tier NBN speed is due to the exhorbitant NBN pricing.

Furthermore I accept Mortow’s offer of having my high speed NBN for free and await him ensuring delivery of it.

David Watson
David Watson
5 years ago

NBN Co and speed are distinctly different entities. Look how long it took them to roll out in suburbs.

5 years ago

Rob is correct. I have 25 MBps NBN satellite and the cost is exhorbitant to get any level of capacity that would permit streaming just about anything. To get 60GB per month you would pay $150 per month. Since an hour of HD streaming is going to eat about 1 GB that means you could watch one 2 hour movie or tv per night. Forget your other internet requirements. Yes, you get 85 GB of ‘off peak’ but that is 1AM to 7AM only and who is staying up and streaming at those hours? So the off peak is generally useless and just used to make it look like the plan is a good deal. Worse, the NBN LIMITS users to a 75GB rolling maximum in any 4 week period, so you couldn’t use your 60 GB at the end of one month and your next month’s 60 GB in the first half of the next month. NBN DOES set pricing despite their desire for the appearance of hands off. Any fool knows if you set the wholesale price you also dictate the minimum retail pricing because ISPs need to be profitable. Competition sets the maximum prices. NBN pricing is exorbitant and ‘the bush’ pays a lot more per GB and is STILL speed limited (12 or 25 MB download and 1 or 5 MB upload) relative to urban and regional centres. The NBN should have the same price per GB no matter the delivery mechanism required to get the service to a customer – it was supposed to level the playing field. The current price structure and plan GB limits created by the NBN simply allows their executives to continue to make really silly statements like those in your article. Australians are paying more for Internet than they did pre NBN and most can’t afford to take advantage of higher speeds because that just sees their meagre data plan disappear faster! Get real….

5 years ago

Why is there a difference in pricing between low and high speed ? Why is there pricing differences depending on how much is dowmloaded. Anyway, surely upload speed is much more critical than has been generally discussed in forums such as this.

5 years ago

Seems pretty obvious to me. Consumers don’t see the value for the prices being offered. I’m trying to reduce my costs, not increase them. If I can get better speeds for the same money then I might be interested.
I have just started looking at the various offerings and it is very interesting that there is very little difference in pricing or value for money from all of the available providers.

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