iiNet withdraws 20GB NBN satellite plan

iiNet has now withdrawn its 20GB NBN satellite plan from market, as ZDNet first had reported the company was planning to do.

Capacity constraints on NBN Co's interim satellite service have forced iiNet to cease offering the 20GB download plan for customers on the service.

The move had been expected, after ZDNet revealed earlier this month that CEO Michael Malone had stated that the biggest issue with the 6,000 iiNet customers on the service was that they actually wanted to use it, and there wasn't enough capacity on offer.

NBN Co is preparing to launch two new satellites in 2015 that will service the three in 100 premises that will not be covered by the fibre-to-the-premises network or the fixed-wireless network. To fill the gap in the market before the launch, NBN Co has obtained capacity on Optus' and IPStar's existing satellites in a deal worth AU$300 million .

Given that the new interim service was offering cheaper internet access and a variety of providers in parts of Australia where it previously didn't exist, uptake has been significant for NBN Co. As of the end of June, there were 34,600 customers on the interim service. The current cap is 48,000, and former Australian Communications Minister Stephen Conroy indicated in Budget Estimates in May that current capacity is expected to be exceeded in early 2014.

In a statement today, iiNet's chief regulatory officer Steve Dalby said that the 10GB and 20GB plans on offer from iiNet had put a "considerable strain" on the satellite network designed by NBN Co.

"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. So we have decided, after careful consideration and for the benefit of the 6,000 customers already connected to iiNet's interim satellite service, to only offer our very attractive 10GB plan. We will withdraw our 20GB NBN-Satellite plan for new sales, effective immediately," he said.

Unless NBN Co obtains more capacity, the issue is likely to only get worse. It could also be compounded if the current cap on the number of customers is raised. The Coalition would like to see the limit raised in order to accommodate more customers, but Conroy indicated in May that this would be a very expensive exercise.

"NBN Co has investigated options for expanding the available capacity on the ISS," he said. "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 Coalition will go ahead with the construction and launch of the two new satellites should it win the election.

After the publication of ZDNet's first article on this story, an NBN Co spokesperson said the company had nothing further to add.