TECHNOLOGY SPECTATOR: NBN Co's pricing rethink

NBN Co looks ready to compromise on the entry-level access fees for its multicast service, while Flexigroup gets ready to take on PayPal in the mobile payments space.

Technology Spectator

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NBN Co might not be on the same page as the retail service providers when it comes to the Special Access Undertaking but it has reportedly decided to take a far more conciliatory approach with regards to the pricing of its multicast product, a feature that allows an ISP to deliver video and interactive services to its fibre-connected customers.

Telcos were given their first glimpse of the multicast product in August last year and with the official launch of the service slated for the middle of this year The Australian Financial Review reports that the entry-level access fees for the service have been reduced.

Before we go any further, here’s a quick primer about what multicast is all about. Basically, it’s a protocol that replicates a stream across a network to the specific endpoints, in this case 121, eliminating the need to send multiple streams of the same thing to different end points. Ordinarily, if 100 people want to see the same content at 5Mbps a second, the server would need to pump out a 500 Mbps stream. Under Multicast, only one stream needs to be sent out, which is then duplicated by the network.

The key benefits of the feature is the significant bandwidth savings for the delivery of one-to-many services and in turn enable more cost effective delivery of services such as Internet Protocol Television and other video content.

The original pricing regime consists of two components:  the price for the Multicast Access Virtual Circuit, which is the cost of getting the connection, and the price for the Multicast Domain – the cost of streaming all the content into a home of a customer.

Under the terms of the regime, RSPs need to pay $5 a month per user for a 20Mbps allocation on the MAVC, with an additional allocation of $5 per extra 10Mbps up to 60Mbps. Meanwhile, the Multicast Domain is priced at $2.50 per Mbps per month, with RSPs paying $250 per month per 100 megabits per second (Mbps) capacity for 121 point of interconnect.

The main problem raised by the telcos – most significantly Internode’s Simon Hackett – was that a minimum price of $5 per user for a 20Mbps connection was going to be too high a cost for RSPs.

Then there is the issue of the domain pricing, $250 a month for every 100 Mbps per second channel per PoI. So the streaming costs at $250 a month for every one of the 121 NBN PoI is going to cost a provider $30,250 a month.

As far as the telcos and the likes of Foxtel and Fetch TV are concerned the original pricing has always been suited to a premium product and will not encourage the take up which is critical for the development of the service. Internode was one of the first to propose changes to the pricing structure with Simon Hackett pushing for a structure that delivered "a more fine grained control over the granularity of capacity purchased by an RSP”, and the AFR report suggests that other telcos and pay TV providers have also been busy behind the scenes.

Dropping the unit cost is perhaps the first and easiest thing that NBN Co can do to encourage take-up, or at least create an environment to give the technology a chance. Cutting the entry-level MAVC prices should encourage the entry of new entrants because the current industry is chugging along at 3 Mbps per second, that’s what is delivered over Fetch TV, for standard-definition programming. The problem isn’t the unit cost per megabit but the fact that at $5 for 20 Mbps most RSPs won’t be especially keen to pay that price unless there is sufficient demand from customers. The original pricing regime, with regards to domain costs, also effectively leaves smaller ISPs in the cold. Internode’s Simon Hackett told ZDNet in August last year that to make multicasting work an ISP would need at least 12,000 users at each service area to bring the wholesale pricing down to $10 per user.

So without scale a provider has no chance and that in turn is bad news for Fetch TV and Foxtel’s ambitions in the IPTV space. Of course the NBN has always been about scale hence the consolidation merry-go-round in the Australian telco sector which hasn’t ended just yet. However, NBN Co’s reported decision to revisit the pricing of the service should be seen as a fruitful compromise by RSPs and IPTV providers.

Flexigroup gets ready to take on PayPal

Moving to the mobile payment space, local financial services company, Flexigroup is taking on PayPal with the launch of its Paymate OnTheGo payment option. The product – aimed directly at the local small business sector – turns a smartphone into a credit card reader or a mobile cash register.

Flexigroup’s launch follows in the footsteps of PayPal which launched PayPal Here in March. Just like PayPal Here, Flexigroup’s Paymate utilises a mobile application and a lightweight encrypted card reader, dubbed Swiper, which costs $20.

Merchants are charged 2.25 per cent per transaction plus .50 cents, which compares favourably with PayPal Here, which takes a 2.7 per cent cut for each credit card and PayPal transaction.

The launch of Paymate and PayPal Here marks a further development of the physical mobile payments market in Australia. The local ecosystem is starting to show greater diversity, which in turn should lead to higher adoption.  

Interestingly, FlexiGroup’s e-commerce head Andrew Pipolo used to run PayPal’s Australian operations and should have a pretty good idea of just what’s at stake here.

FlexiGroup head of e-commerce Andrew Pipolo said there was significant market potential for mobile payments systems in Australia.

Given the high smartphone adoption rates in Australia and the fact that there were 2.7 million small businesses, the potential for mobile payments is immense. Flexigroup has raised the banner as a local competitor to an overseas giant like PayPal and it’s a move that has every chance of paying off handsomely.

Optus' latest management reshuffle, Fairfax says hello to Google Apps

Optus reportedly has a new head of television with the former head of Optus Country, Tim Carmichael, getting the gig. According to The Australian Financial Review, Optus’ owner Singapore Telecommunications has made Carmichael in charge of Optus’ subscription television product MeTV.

In other news, the immediate future of Fairfax Media’s board may be in tumult but at least the media company has managed to take a positive step in the IT department. Fairfax has finally, and some may say belatedly, decided to ditch Microsoft and move its staff to Google Apps for Business.

The decision makes Fairfax Media one of the largest Google Apps customers in the Asia-Pacific region and the media company will now work with Google Apps Premier Reseller, Cloud Sherpas, to ensure all staff has access to Google Apps by November 2012.

Elsewhere, the Australian Grand Prix Corporation has gone live with business management software provider Sage Business Solutions’ ERP Accpac and Sage CRM offerings. The integrated software is being used to manage the AGPC's annual budget and will contain all data relating to corporate customer sales and sponsorship relationships.

Dobbing in software pirates, Husic's Tech inquiry closes up submissions

The Business Software Alliance has stepped up its efforts to make life as difficult as possible for home-grown software pirates, with the organisation now offering up to $20,000 to ‘whistleblowers” keen to provide pursuable leads on businesses using pirated or unlicensed software through July 31. This is a four-fold increase in the standard reward of up to $5,000. According to the 2011 BSA Global Software Piracy Study the commercial value of pirated software in Australia totalled $US763 million last year.

Meanwhile, the government has closed submissions for Ed Husic’s long-sought after tech inquiry. With submissions closing last Friday, it will now be up to the government to turn the public angst over technology pricing discrepancies in Australia into some kind of tangible result. 

Awards galore

Deloitte Consulting partner, Kaylene O’Brien, was won Victorian ICT Woman of the year at the 2012 iAwards, one of the premier technology awards platforms within Australia’s technology industry. Ms O’Brien scored her won in the category highlighting an inspiring Information Communication Technology woman ‘who has made a consistently distinguished contribution to the ICT industry’. 

Speaking of awards, Roads and Maritime Services together with NICTA have won two AIIA iAwards

RMS and NICTA developed a high-tech system to automatically and continuously monitor the Sydney Harbour Bridge’s structural integrity and were recognised for their work in the tools and infrastructure and e-logistics and supply chain categories.

Meanwhile, News South Wales-based managed services, IT consulting and product provider Regal-IT has been awarded the inaugural Dell Asia Pacific Partner Direct Excellence Award for Storage Regal-IT joined with five Dell channel partners from China, Korea, Japan, Thailand and India in being a winner in the Storage Excellence category. Other categories covered Server and Solutions excellence.

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