HFC agitators ignoring BSS hit

HFC agitators ignoring BSS hit

Summary: Just because it sounds plausible in an academic world to keep Optus' hybrid fibre coaxial network alive, doesn't mean that it is.

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It is astounding how many in the telecoms sector desperately want to assign value to a network that has only ever been a marginal player in Australia's market. Like flat-earthers or climate-change deniers, they insist that things are a certain way, even though evidence and experience suggests otherwise.

Enter Michael Porter, a Deakin University academic who has developed a new plan for a Coalition Government to reduce the cost of the National Broadband Network, save Australia’s broadband customers from the pain of having a modern communications network, and reverse the Australian Competition and Consumer Commission's approval of NBN Co's AU$800m deal to buy Optus out the hybrid fibre coaxial (HFC) market.

It was always going to be a contentious deal, representing what is in textbook terms a blatantly anti-competitive move and causing Malcolm Turnbull fits of press-release apoplexy. The contract has, of course, been warmly welcomed by Optus, which sees the deal as a great way to recoup its investment in what has been, at best, an underperforming fixed-network asset — and, at worst, an albatross around the company’s proverbial neck.

Diversity is the enemy of the BSS and its companion OSS, which lies at the heart of any telco network, and ensures that services run smoothly and customers get billed correctly.

Before you go ranting about the need for fixed-infrastructure competition, remember that Optus' network has been severely aggrandised in the minds of those arguing for its preservation. Unlike Telstra's relatively more-extensive HFC network, the Optus cable only services are, according to Optus itself, available to "selected homes in Sydney, Melbourne and Brisbane. Service is not to be used for commercial purposes".

There are two key points here: firstly, that this network is a paper tiger; it's only available in a few parts of Australia's three largest cities, so ascribing it value as some sort of ubiquitous broadband competitor is blindly optimistic. Its 429,000 subscribers represent less than 5 per cent of Australia's premises.

The second key point is that the service is not to be used for commercial purposes. This restriction, of course, is there so that companies won't flood the network with large volumes of data that Optus would prefer were shunted over more technically-capable networks; as I, and every other Optus cable user know, HFC performance can vary dramatically, depending on hourly usage volumes and the introduction of new services, like Optus MeTV, tends to impact performance for everyone.

Another issue that proponents of HFC preservation fail to understand is that perfectly competitive HFC networks are beneficial to nobody. In the US, cable networks have so many markets to choose from that providers pick and chose the most profitable areas to roll out infrastructure, where they can effectively cement infrastructure monopolies.

Look at the coverage map for cable provider Cox Communications, for example, and you'll see a highly fragmented network that cherry-picks many of the most populous areas. Some areas may have overlap between different service providers, but, on the whole cable, infrastructure is an opportunistic investment.

It's only because of that country's mature market that most homes can get cable — but Australia's population is so heavily weighted towards the city that it's clear the private sector will never follow the same path. The private sector was only ever interested in dense capital-city areas — and on this point, Australia blew it: while the desire for competition drove two mirrored HFC roll-outs throughout some of Australia's cities, infrastructure competition was simply untenable. That's why Optus stopped trying to compete with Telstra's roll-out, and it's why Optus is desperately eager to get rid of its HFC network.

Simply put, HFC is an artefact of 1990s-era competition idealism, not a viable part of a 21st-century broadband network. So while academic models might enable the preservation of the Optus HFC network — and counteract what Porter calls "a travesty of economics [that] undermines a competitive pro-investment strategy" — they have little resonance in reality.

Where, after all, is this "pro-investment strategy"? Optus hasn't invested in its cable network for over a decade. This seems to be a particularly dramatic example of economic theory overriding telecoms reality.

Yet, the biggest surprise is in Porter's alternative suggestion: that the NBN be shifted to an area-by-area roll-out model that would see broadband tenders awarded based on the technologies already available in a given area.

Porter's model would create a patchwork of varying technologies and competing commercial interests, which would only perpetuate geographical service discrepancies.

This is another of those ideas that sounds good in theory, but would be a disaster in practice. While Porter's model might allow the staged targeting of the most broadband-deficient areas, it would create a patchwork of varying technologies and competing commercial interests, which would only perpetuate geographical service discrepancies — and reassert Telstra's monopoly in rural areas, whose low population would make them commercially unattractive to competing tenderers.

Not only would this approach muddy the waters of service consistency, but it would create an operational nightmare for any authority trying to manage this service patchwork. Diversity is the enemy of the business support system (BSS) and its companion operational support system (OSS), which lies at the heart of any telco network, and ensures that services run smoothly and customers get billed correctly.

BSS/OSS investments are always significant and usually incredibly complex: even NBN Co, which is building an architecturally homogeneous network, spent AU$124 million on its BSS/OSS and related components — in the last six months of 2011 alone — to ensure that it can provision and support its services around the country, in the same way for all subscribers.

Time has repeatedly shown that diversity is the enemy of the BSS: once you have different networks to support, you have to service customers on those networks using different back-end systems, which have inevitably been designed and implemented with different parameters and service levels.

Ironing out the wrinkles in such systems, which usually requires exhaustive and exhausting systems integration or migration, is a major reason why telecoms mergers have struggled in the past. It's the reason competitive ADSL providers have found it hard to match Telstra's customer service levels: because they historically lacked visibility into its network and, therefore, customers had to take its word that it was doing anything for their customers, at all. And, in many cases, it wasn't.

While an area-by-area roll-out might achieve the policy goal of capitalising upon existing infrastructure, it would create an NBN that was operationally dysfunctional and, in all likelihood, incredibly difficult to upgrade for the future. It would disincentivise private investment, perpetuate the pained existence of small networks, with little viability on their own, and ensure that our broadband future remained tied to the scatterings and smatterings of 15 years of opportunistic infrastructure investment. Forgive my scepticism, but that doesn't sound like a path to anything but chaos.

What do you think? Does area-by-area tendering promise a better NBN? Is it just the latest attempt to denounce Labor's NBN plan? Or should we be preserving existing HFC assets at all costs?

Topics: Telcos, Government, Government AU

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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8 comments
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  • Troll

    David

    You can keep trolling for Labor/Green government. Your political bias shows.

    "Like flat-earthers or climate-change deniers, they insist that things are a certain way, even though evidence and experience suggests otherwise."

    This is the most stupid comment you will find in a supposed technical article. What has this comment has anything to do with NBN.

    You should be writing in ABC
    Van Der
    • What political bias?

      He's making a valid point, here - people will sit back and deny the evidence when it contradicts their pre-existing beliefs. This applies to pretty much everything - even the NBN.
      Mike_K-a5045
  • moron

    Given that:
    A) Illegal downloads and porn account for the majority of home user bandwith requirements
    B) That we are in aging population i.e. the majority of our population won't even be the young torrent downloaders but the old dudes whacking off refer to the ABS for the percentage of over 65s http://www.abs.gov.au/ausstats/abs@.nsf/0/ae3caf747f4751cdca2579cf000f9abc/Body/0.6F74!OpenElement&FieldElemFormat=gif
    C) NBN presently represents and serves less people than coax
    D) That coax can and does deliver 3 mb/s downloads with excellent latency
    WHAT IN THE HELL DOES A MAJORITY OLD POPULATION NEED FIBRE TO HOME FOR IN THE NEXT 5 YEARS???? And is it really more important than preserving unemployment, healthcare or retirement benefits? Hell no!
    Andrew Nell
    • Missing the point

      A) The underlying statistics are more complicated than that, and it's largely irrelevant anyway
      B) The NBN will improve access to health care and other services. An ageing population benefits greatly from this.
      C) Irrelevant. The HFC networks are mature networks. The NBN is in the early stages of rollout. Comparing subscriber numbers now tells you approximately nothing.
      D) HFC-based services are heavily affected by congestion, resulting in a failure to deliver even the low figure you have provided. They also have other annoying technical limitations, and (most importantly) limited coverage.
      Majority-old doesn't mean exclusively old. The government serves more than just the biggest group (eg. they have policies to benefit students, even though most people aren't students!). Also, see B.

      You're still missing the point. Keeping existing HFC networks and trying to get them to compete isn't really going to work. Replacing them both with the new fibre network is technically and economically feasible.

      You've also missed the other point. The NBN is being built now for the needs of 2020 to 2050. If you build infrastructure for "now", it will be worthless by the time it is done!
      Mike_K-a5045
    • Piracy myths

      Just wanted to address point A, and how far off this could actually be. In the US, stats show that BitTorrent traffic only now accounts for 8% of all Internet traffic, while Netflix alone accounted for 40% of all evening bandwidth traffic (source: http://www.digital-digest.com/news-62989-Is-Netflix-Streaming-Helping-To-Reduce-Piracy.html).

      Just last month, over 1 billion hours of video content was served by Netflix's Internet based streaming service. This makes them the second most watched provider if they competed with cable/pay-TV providers in the US, and they now have more subscribers than all the US cable and satellite companies combined (if this happened here, it would mean the end of the Foxtel monopoly, which can only be a good thing).

      Bandwidth is being monetized by legal content, and if Australia doesn't keep up, we're going to be left behind. The NBN will not only let us keep up, it will put us ahead of everyone and enable the streaming super high quality HD content that, until now, has only been available on disc formats here in Australia (our crappy FTA HD quality included).

      As for C), as the article says, HFC subscribers only account for 5% of all customers, and all will be migrated to the NBN as part of the Telstra/Optus deals. HFC, described as a real bastard case by both Telstra and Optus when it comes to revenue, maintenance and competition, will never be capable of providing next-gen broadband to 93% of households.

      As for D), the NBN is an investment, not a cost like welfare benefits. As an investment, the NBN will make back its money and will generate income for the government, income that can be used on roads, schools and welfare payments (this not not require the future sale of the asset, which would obvious bring in a lump sum in revenue for the government). By not going ahead with the NBN, and say, going with the Coalition's mishmash of a plan (which is not an investment, but a cost that they do not plan on earning back - possible $17 billion worth of costs, according to estimates done by Citi), you may end up having less money to pay for things like "preserving unemployment, healthcare or retirement benefits"!
      DVDGuy
      • Corrections

        Sorry, basket case, not "bastard case". And HFC is 5% of all premises, not "of all customers".
        DVDGuy
  • OPTUS HFC Network

    David you have some good comments but what is laughable is you contradict your own comment. If OPTUS network is such a useless network why is NBN Co wants to pay $800 million to put it out of action why don't they let it die by itself. Problem with your argument is there is no network in the world which has the same technology for OSS/BSS systems. Unfortunately all networks consists of patchwork networks. This is simply because networks have lifetimes and even when NBN Co complete the stage 1 of their project in 10 years time there will be so many iterations of OSS/BSS systems they will be grappling with themselves. This argument reminds me of the Bush quote " either you are with us or against us". In real life things are not black and white but billions of colours and it is sad people can not see it. I can understand the politicians but technocrats like you should have little better understanding.
    wijitha17
    • Hmm nope

      There is no contradiction.

      The reason that they want to pay them to decommission their old network is because it would die a slow death, and neither company would benefit financially from this.

      The argument being put forth is that there is no LONG TERM benefit in trying to keep it running. That doesn't mean that it would collapse overnight - Optus would have to try and keep it going for as long as they can to try and milk every last dollar out of it.

      The deal allows Optus to cleanly shut it down without annoying any shareholders.

      As for OSS/BSS, there is no doubt that NBNCo's systems will change over time. However, it should be relatively straightforward to move older operations to the newest iteration each time.

      Integrating a dozen different systems is hard. Transferring all customers from ONE older system to ONE newer system is easy.
      Mike_K-a5045