Optus deal to relieve NBN satellite constraints

As NBN Co reached the limit for customers that it could take on its interim satellite service (ISS), users also began reporting a significant drop in the quality of the service due to the number of customers taking it up.

Ahead of the launch of NBN Co's two Ka-band satellites in 2015, NBN Co has been providing wholesale satellite services covering approximately 250,000 premises across Australia using capacity on existing satellites owned by Optus and IPStar.

While the service covered 250,000 premises, NBN Co was only able to buy enough capacity for a maximum of 48,000 premises. Late last year, NBN Co ceased taking new orders for services on its interim satellite service once it reached this limit.

Before the election, the Coalition had called on the then-Labor government to increase the capacity of the service, but then-Communications Minister Stephen Conroy warned that it would be incredibly costly to gain extra capacity on these satellites.

"NBN Co has investigated options for expanding the available capacity on the ISS," he said in May.

"If we were to buy all the remaining capacity on IPStar and other satellites, we could potentially increase our user numbers to about 75,000. To add about 7,000 new services, the cost would be roughly AU$86 million; to add 17,000 new services, the cost is estimated at AU$143 million; and to buy all 27,000 of these services, the cost is estimated at AU$206 million."

The interim satellite service is understood to be a major issue for the federal government, with not only users complaining about being unable to get onto the service, but also those on the service already experiencing a significant deterioration in the quality as more and more customers were added.

iiNet was forced to withdraw its 20GB satellite plans before the capacity was reached, because customers using the full 20GB per month were putting a "considerable strain" on the service.

"With no possibility of a network upgrade available from NBN Co, each new customer was adversely impacting the speed and experience of our current satellite customers," iiNet chief regulatory officer Steve Dalby said in August.

Communications Minister Malcolm Turnbull last week complained that Labor had misled the public about the original capacity limit for the service, but did not outline what he plans to do to address the issue.

"[Labor] bought some satellite capacity on other satellites and offered this service. And they said that it covered 250,000 premises. They said we have passed 250,000 premises with satellite. But they never had the capacity to serve more than 48,000. They didn't tell people that," he told 4BC radio in Brisbane.

"What they should have said was, 'Ladies and gentlemen, we've got 48,000 spots, services available. First in, best dressed, once the 48,000 spots are filled there'll be no more available.' And they never said that. They basically misrepresented, and of course you've got thousands of now disappointed people."

The government is moving to address one part of the problem by increasing the capacity on the service for existing interim satellite customers. According to Paul Rees, a representative from retailer SkyMesh posting on broadband enthusiast website Whirlpool late last week, NBN Co is allocating more bandwidth to the service thanks to a deal with Optus.

"Over the next three months, NBN Co will be allocating more bandwidth to service the existing NBN interim satellite service customers in congested beams, and they will be migrating a significant number of customers from IPStar Beams to NS001, where NBN Co has been able to buy more bandwidth from Optus," he said.

While NBN Co, Optus, and a spokesperson for Turnbull had not responded to requests for comment on the matter, ZDNet understands that an announcement on the extra capacity for the interim satellite service from the government is imminent.

A longer-term solution for customers still waiting to get access to any NBN satellite service is more complex, however; NBN Co has to weigh up the cost of installing equipment for residents to be able to use the interim satellite service in 2014, only to face the prospect of potentially having to install new equipment that is compatible with NBN Co's satellite service when the satellites come online next year.