ACCC decides NBN needs to cater beyond its layer 2 remit

When it comes to artificial constructs, the combination of the Australia Competition and Consumer Commission (ACCC) and National Broadband Network (NBN) is an absolute world-beater.

At the heart of NBN is the loathed connectivity virtual circuit (CVC) pricing structure, which telcos have bashed since its inception.

Thanks to one of the original sins of NBN, that it needed to provide a return to government to keep it off the Budget papers, the per Mbps charge was created. From a user standpoint, this has been a handbrake on the network ever since.

When NBN laid out its plans for speed tiers in 2013, former Telstra chief economist John de Ridder went full Nostradamus.

"There is a very real danger that billions of dollars could be spent providing capacity that is neither adopted nor used," de Ridder said in January 2013. "This will be the case if premiums are charged for higher speeds, because consumers are not prepared to pay for speed."

Nevertheless, in its wisdom, the ACCC ticked off on the CVC and its pricing.

Where the CVC gets real prickly for telcos is that NBN sells and allots it on each point of interconnect (POI) on its network. For this reason, it is possible that a retailer in one Sydney suburb might be clogged because it has not purchased enough capacity, while users in a suburb or two over on a different POI are fine.

In the ancient NBN past of 2010, the government-owned wholesaler wanted 14 points of interconnect around the nation. However the ACCC wanted far more than that, and that is why today the network has 121 POIs across Australia.

Prior to his stint on the NBN board, Internode founder Simon Hackett said in 2010 having that many points of interconnect would raise costs and reduce competition.

"In particular, 120 POIs will generate higher setup and running costs for all industry players -- except Telstra, of course, as it looks like these points will all be Telstra exchanges," Hackett said.

See also: NBN rejects speed test reality for one of its own

"At a deep level, it seems like the 120 POIs model is a bit of an artificial construct, keeping an existing backhaul market supported, to an extent, in the new world order.

"This large number of POIs will drive the industry toward having a smaller number of bigger players, rather than a larger number of smaller players, as the overheads of operating and ramping up in 120 POIs will be too much for very small players to afford."

From the perspective of 2019, Hackett has also gained a high number of Nostradamus points, and the ACCC is zero from two on artificial constructs.

In recent years, it looked like the ACCC was onto a winner with its speed tests of the nation's NBN providers. Now broadband consumers can find out which retailers were skimping on CVC, and which ISPs could claim to be truly the fastest.

Last week though, the ACCC made an interesting addition to its latest speed report when it said users would never be able to "make full use of their plan speed".

"This is because headers, or tags, are added to consumers' communications when they are sent over a network, to ensure the communications are sent to the right network addresses," the ACCC said.

"The current capacity does not appear to allow for this extra data, preventing the communications from being sent at the maximum plan speed.

"NBN Co could resolve this if it allowed services to run 5% faster before enforcing speed limits."

The key thing to realise in what the ACCC is saying here is that NBN is meant to be constrained to being a layer 2 provider that just moves bits in Ethernet frames around -- anything above that is the purview of retailers.

The one exception being earlier this year when NBN announced it was trying to loosen the restraints and move into layer 3 on satellite services to allow it to exempt certain traffic from its satellite data quotas.

Other than that, NBN is an Ethernet Bitstream company, and that's that.

History: Telstra must take part of the blame for NBN creation: Chair

But the ACCC has other ideas, and it appears based on the layer that the regulator is conducting its speed tests at.

"All of our measurements are carried out at layer 7, which is the same as the majority of other consumer-based speed tests on the market," the ACCC told ZDNet.

A passing knowledge of networking protocols would say that if you have speeds set by a layer 2 provider, the moment you slap on some TCP/IP headers, the maximum available speed at those higher layers would not match that at the lower layers.

Perhaps most head-scratching is that the ACCC said it wanted to educate users.

"RSPs tend to advertise products based upon NBN wholesale products (e.g. NBN25, NBN50), which operate at layer 2, the wholesale speed is what we dub 'maximum plan speed' in the report," it said.

"But for a NBN100 based product, the highest speed a user's application (L7) will ever be able to achieve is ~95Mbps. So whilst the user is actually transferring data at 100Mbps, for all intents and purposes, only ~95Mbps of that is actually useful to them."

Just to repeat, a service is transferring data at 100Mbps, but because the ACCC is comparing apples and oranges with its layer 7 test, it isn't happy about the 5% overhead of TCP/IP headers.

To add to the craziness, NBN is thinking about over-dimensioning the downstream speeds of its 50/20, 100/20, 110/40, and 250/25 products.

"NBN continues to consult with RSPs and is working through the technical aspects required to sufficiently over-dimension key product tiers to compensate for protocol overhead so that more customers may receive faster download speeds," NBN told ZDNet last week.

"The company will announce the final outcomes of its four-month consultation process towards the end of this month."

If the NBN wasn't convoluted enough already, the current reality of layer 2 speed tiers is about to go out the window.

It's possible that in 2020, if you order an NBN100 service, it is provisioned to provide something like 107Mbps, so that users can hit 100Mbps on the ACCC speed tests.

The simple solution would be to actually test NBN's speed at passing bits down at layer 2 like it was designed to, but alas, the ACCC is setting the terms for NBN once again.

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