The most difficult consulting or analyst assignments are those for which the client wants a specific outcome. It's far easier to help a client make an informed decision than support a decision that has already been made. Some analysts are very comfortable with providing the client's desired outcome; better to be engaged than hunting for the next assignment.
A safer route, for the client, is to engage an analyst who has already expressed an opinion that aligns with their view; the work will no doubt support the predisposed opinion. Any forward-looking assumptions may be intrinsically skewed to the desired outcome.
It is clear that in commissioning the National Broadband Network reviews the government has carefully selected consultants, analysts and economists that have previously expressed views that support their position.
This is an important consideration when reading through the latest review commissioned by the government into the NBN, the cost-benefit analysis. I read through the demand side analysis that the Vertigan Panel outsourced to UK based group Communications Chambers.
It's clear that the approach and assumptions made skewed the data-speed requirements to the lower side.
The report approaches the problem by considering the current paradigm, and then develops incremental forecasts. If we cast our minds back 10 years: Facebook was only just getting stared, Netflix had not yet begun streaming content and Apple had just opened it's iTunes online store. Such high usage applications would not have been considered in the then paradigm.
The internet and high speed broadband facilitates paradigm shifts in innovation, resulting in consumer behavior shifts, so an incremental approach would seem somewhat flawed.
Communications Chambers are honest in disclosing that many of their assumptions are arbitrary and others may well have legitimate reasons for imposing different figures.
The most reported number out of their findings is that the median household will only need download speeds of 15Mb/s in 2023. They also state this means that half the population would be disappointed in the service if provided with these speeds, which isn’t widely reported.
So given their approach, let us look at some of their assumptions around the use of video by households.
They have arbitrarily assumed ownership of 4K capable screens at 43 per cent and viewing of 4K content on these sets at 28 per cent in 2023.
The availability of 4K screens is growing and costs are reducing quicker than expected. Kogan sell a 55 inch UHDTV for $999. There is currently no physical media available for the distribution of 4K. Given the steady closure of stores renting Blu-rays, there doesn’t need to be a cheap physical media, we will just stream 4K content. When considering a 10-year forecast on household video consumption, an assumption should be made on the introduction of 8K, but once again this is not considered by Communications Chambers.
They also make some assumptions on the efficiency of video coding, assuming a 9 per cent year-on-year bit rate reduction. This would be realised if you were starting with older video coding standards and then moved to newer standards. Most of the sources that they quote show the long-term efficiency improvement going from MPEG 2 to H264 video coding. The latest High Efficiency Video Coding (HEVC) H265 standard requires between 10-20Mbps to transport 4K. They assumed 16Mbps in their modeling, decreasing to 6Mbps in 2023, i.e., they assume the starting point uses the latest coding.
This is a flawed assumption, as it would require a new more efficient video coding standard and this not expected for at least another 10 years.
The average 15Mbps connected household wanting to stream 4K will have a high probability of viewing disruptions.
Communications Chambers, when talking about internet TV providers, only mentions Fetch TV and Foxtel in passing. This is easy to understand when they refer to an ACMA source report, produced in 2012. Foxtel’s catch-up service was launched in May 2012, so it is not referenced in the ACMA report. Anecdotally, Foxtel catch-up happens to be the largest use of broadband capacity in my household, and by most of my neighbours.
The NBN Multicast service would be very attractive for subscription TV providers. The service would allow subscription TV providers the ability to broadcast to NBN based connected households. A migration of existing subscription TV services from closed networks to an NBN access service, is not considered by Communications Chambers. Future subscription TV services will deliver 4K, or possibly 8K, via a broadband IPTV based service.
How would I approach this type of analysis? I’d take a very similar path to Communications Chambers, with a snapshot of the bandwidth speeds required now, but with the realisation that I’m not going to predict all the applications that might be in use in 2023. What I could do was look back over the last 20 years of internet access and consider how speed requirements have grown and extrapolate this into the future.
However, this approach would not necessarily deliver the client’s desired outcome.
It is always best to engage consultants and analysts that are pre-disposed to the clients opinion, they will intrinsically skew the their assumptions and approach to align with their own opinions, providing the clients desired outcome.
Chris Coughlan is an independent telecommunications and media analyst.