Did the “Netflix effect” kill the NBN?

A claim that the rise of streaming services like Netflix had effectively killed off superfast speeds on fixed wireless connections has inflamed many in the industry and online.

Last year NBN’s former chief executive officer Bill Morrow confirmed the company had dropped plans to provide speeds of 100 megabits per second in 2018 via its wireless network saying it would cost too much.

“You would be blown away at the cost. It just would never happen,” Mr Morrow told a Senate inquiry.

The fixed wireless network, which uses transmission towers to connect users to the NBN, was originally intended to be a low cost and quick way of connecting people to the network, especially in rural and regional areas with small populations.

They were promised superfast speeds to match those on the fixed-line network but this has now been put on the backburner because the so-called “Netflix effect” is causing unexpected congestion on the NBN and upgrades to get higher speeds would cost billions.

“What we saw in 2015 was the introduction of Netflix within Australia and that was a catalyst for change,” NBN head of stakeholder relations Sam Dimarco told ABC.

“On all of our networks — including fixed wireless — we saw usage behaviour and consumption accelerate, which put pressure on the network in terms of how it was designed originally.”

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Ironically a network that was supposed to be “future-proof” seemingly can’t cope with the popularity of a new technology.

But experts have hit back at claims NBN Co didn’t anticipate the rise of Netflix, and documents released in 2010 also tell a different story.

In 2010 then-prime minister Julia Gillard released a corporate plan for the NBN when she was struggling to gain support for some key legislation.

The plan clearly noted in its summary of “key industry trends” that “strong usage growth is expected to continue with real-time ‘on-demand’ traffic increasing with Video-on-Demand (VoD), audio/video streaming, VoIP among the fastest growing services”.

Even then-opposition leader Tony Abbott seized on the report and told a press conference: “It’s pretty obvious that the main usage for the NBN is going to be internet based television, video entertainment and gaming.”

Mr Abbott went on to question whether the estimated $50 billion project was sensible.

“I want to stress that we are not against using the internet for all these things but do we really want to invest $50 billon of hard-earned taxpayers money in what is essentially a video entertainment system?”

Then-shadow minister for communications and broadband Malcolm Turnbull, who was also at the December 20 press conference, added: “The applications that people talk about in terms of productivity, business applications … overwhelmingly do not use a lot of bandwidth. The big demands for bandwidth that we’ve been seeing across the internet over recent years are being driven by video.

“You don’t need anything like 100 megs to have IPTV or FetchTV or AppleTV, Netflix … all those things are all doable but … their whole business edifice is built on more and more and more demand for interactive gaming and video content.

“Neither of us have any problem with that if people want to sit at home and watch lots of movies, that’s their choice, it’s a free country but should the taxpayer be spending $50 billion to subsidise that?”

Emeritus Professor Rod Tucker of the University of Melbourne told news.com.au the “Netflix effect” was no surprise to people in the business.

“The growth in popularity of video streaming (Netflix, Stan, SBS On Demand, iView, etc,) has been predicted for many years,” he said.

“The NBN was supposed to provide the infrastructure that would enable the growth of video streaming and other new online applications.”

PRESSURE TO SPEED UP THE ROLLOUT

Despite offering an inferior service, Mr Dimarco acknowledged that some homes “in certain circumstances” were being connected using wireless rather than fixed-line networks because of the pressure to speed up the NBN rollout.

“It is about delivering a fast, reliable broadband service,” Mr Dimarco told ABC’s 7.30. “It is about doing that in the time frame that we need to deliver, the 2020 target, but doing at the least cost to the taxpayer.”

Prof Tucker said wireless was originally intended to be quicker and cheaper way of connecting homes in rural or regional areas to the NBN but was possibly being favoured now because it was quicker to install.

“It’s expensive to run a wire down a street and to every house so wireless saves money when the population density is lower,” he said.

“It was originally intended to be a solution that was affordable for low density areas but it now seems to be used for more than that, probably to step up the rollout and possibly to save money.”

SPEEDS CAN BE IMPROVED

Prof Tucker said it was still possible for the NBN to make changes to better accommodate streaming services.

When it comes to the fixed-wireless network, Prof Tucker said the only solution was to provide more towers, or to connect more people using the fixed-line network instead.

But when it comes to fixed-line networks, Prof Tucker said the problem was easy to fix. He believes the NBN Co should reduce its CVC charges so that telcos can buy more bandwidth to reduce congestion make connections more stable.

“NBN Co charges a too much for transit bandwidth, which can easily and inexpensively be scaled up to meet the needs of video streaming,” he said.

A NBN Co spokeswoman said: “NBN Co has accurately predicted the rising popularity of video streaming and other types of internet usage. Overall, we’ve tracked data consumption on the nbn access network virtually doubling every three-four years.”

However, she said NBN had underestimated demand for the wireless service.

In the 2012 corporate plan it was estimated that 24 per cent of households would take up the service but the spokeswoman said a strategic review in 2014 estimated take up would be 52-55 per cent because of “increases in popularity and demand”.

She acknowledged there had been some congestion during busy hours but said NBN had been performing capacity upgrades aimed at improving the overall performance of the network.

“NBN Co is committed to continuously improving the service provided as internet demand and data needs evolve,” she said.

“One example of this is an additional $800 million investment to improve the customer experience on the Fixed Wireless network.”

She said around three quarters of regional Australia was actually serviced by fixed-line broadband but NBN would keep working to further improve the fixed wireless network as it continued with its planned upgrade activity.

“We also provide detailed information to Retail Service Providers weekly so they have a good awareness on how the network is performing across Australia, and can talk to their customers about the speeds they can expect, particularly during peak evening times,” she said.

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