NBN: Need for speed II - nobody 'needs more than 1Mpbs'

One of the bizarre tweets to appear on the twitter hashtag for Turnbull's Google Hangout (by SMH) yesterday was "No more than 2Mbps needed to access cloud services" (slight paraphrase). [This tweeter is blatantly pro-LNP, see their website. Another of his tweets underlines this bias/preference.]

This sentiment feeds off the meme "nobody needs more than 1 Mbps broadband!" based on a startling simple, and wrong, bit of Maths:

The average download is 30GB per month (from ABS 8153 series, Dec 2012). A 1Mbps service can carry 3,200GB/year or around 265GB/moth or just 114kbps (allowing for some TCP overhead). So nobody needs 1Mbps!

The three incorrect, simplistic assumptions in there are:

• People use their broadband 24/7, or at 100% Utilisation.
• Ahead of time, people know what they wish to download, there is no "think time" between downloads and they put a ZERO cost on their time when using the Internet.
• There is an average user who is broadly represented, which isn't so with the exponential distribution of demand:
• the low 50% of users, in total, consume just 6.4% (six point four), of downloads. The top 1% consume 10% of downloads, or 75-times more than the "average" group (and 300-600 times more than the bottom 1%)
• So the apparent median download is really 3.84GB or 14.6kbps.
• Therefore, for half the population, this is well within the performance of dial-up modems. According to this meme, why are half the population even interested in Broadband?

By the same logic, Sydney & Melbourne roads have no traffic congestion problems and we could save ourselves billions upon billions in road/freeway construction and upgrades:

• The average speed over the freeways and surface streets, measured over 168 hours in a week, is very nearly 100% of the legal maximum.
• For the majority of the week, say 145 hours, the streets have almost no traffic on them.
• If you leave home at 3AM, you can cover 50km in very short order.
• Therefore, people choose to suffer long commutes and they only have themselves to blame.

Unpacking the issues of Broadband Speed

The really profitable end of the market of NBN Co are the high-volume users, the top 25%-30% who consume the mean download volume or more (30GB-300GB currently).

Everyone else (75%) gets their service at cost or subsidised because of the NBN Co pricing model. That cannot happen in a "one price fits all" charging model such as the current ADSL scheme and we have to presume will be adopted by the Coalition with their Copper/Node Plan.

The tiered pricing of Fibre already allows revenue of $29.62 per service, or 85% higher than the $16/mth of VDSL/Copper's $16/mth (presumed, not disconfirmed by Turnbull). Opening higher speed services (250/100, 500/200, 1000/400) should allow $38.70, or 145% more than copper.

Customers place value on higher speeds and will pay for it: we have the proof in the NBN Co accounts already.

In a previous piece on the Need for Speed, I've included a detail calculation of the direct savings in time/wages for businesses using higher speeds. It ranges from the 50th percentile up to 25th percentile - not the really high-end demand.

Higher speeds with tiered pricing to capture the consumer surplus are just good business: it offers consumers "model choice" and increased value by reducing price per Mbps.

The actual tweet was about "Cloud Services", a major use of which is uploads, for such things as backups. These need to go much faster if the window is limited. 2Mbps over 4 hours is a measly 2.9GB. Not even half a DVD. Active video editing will produce 100's of GB to be backed up or transferred every work day.

The hidden "gothcha" with the Turnbull Copper/Node Plan is congestion at the node, as experienced in the near 20-years of Telstra RIM's in the Gungahlin Experiment. The whole point of the FTTP design is to avoid congestion within the Customer Access Network. NBN Co can cheaply and quickly improve speeds within their Transit Network, back to Points of Interconnect (PoI's) so the only congestion consumers see is from their ISP/Retailer network, outside the control of NBN Co.

Even with our maxxed out ADSL2 network, Akamai report 4-4.5Mbps as the average download speed and that hasn't changed much over the last 3 years, even though ABS reports Download volumes growing at 70%-80% per year. Consumers are already voting with their feet: they use and want more speed.

So, does anyone "need" more than 2Mbps, even for "Cloud Services"?
Absolutely, if you value your time.

Links:

Original link: ARPU proportions, Q53 pg 5, Hansard.
QoN 53: $29.62 AVC income