The NBN satellite sinkhole

The pressure on NBN Co’s interim satellite service has evidently reached critical mass with talk that SingTel-Optus may soon become the beneficiary of some more money, courtesy of NBN Co.

According to The Australian Financial Review, NBN Co and Optus are set to sign a $35 million deal that should help NBN Co appease the 48,000 or so regional and rural customers who aren’t happy with their service.

The deal is reportedly designed to alleviate the issues with existing users rather than add the 100,000 or so customers clamouring to come on board. Which makes sense given that the more people NBN Co signs up to the interim service now, the more customers it will have to transfer on to the long term service, which will be another costly exercise.  

Given the extensive commentary on the issue by NBN Co executives at the last Senate Committee hearing on the National Broadband Network (NBN), a fix was inevitable. In fact, a potential deal with Optus has been on the cards for some time now.

However, the timing of the report is intriguing, coming so soon after NBN Co boss Ziggy Switkowski intimated that while talks where ongoing no deal had been struck.

NBN Co and Optus are staying tight-lipped as well for the moment.  But given the level of discontent within the ranks of consumers and service providers, NBN Co needs a quick fix to contain a problem largely of its own doing, albeit under Labor's watch.

A bridge too far

The $350 million service, set up in 2010, was always meant to bridge the transition from the Australian Broadband Guarantee scheme and the fully fledged NBN satellite service, courtesy of two Ka-band broadband satellites which would allow NBN Co to offer a 12 megabits per second (Mbps) download and 1Mbps upload wholesale service.

Both are still about a year away from getting off the ground and by NBN Co’s own admission the interim service just isn’t up to scratch for the time being.

The signs of constraint have been evident for some time now. Last year, Perth-based internet service provider iiNet called on its rivals to stop selling plans to the NBN’s interim satellite service, due to capacity constraints clogging up the network.

The call came as iiNet stopped signing up new customers and the ISP didn’t mince its words either, saying that during peak periods “the service was so slow as to be almost unusable.”

The interim satellite project has been an expensive endeavour and the contracts signed in 2010 evidently proved to be inadequate.

Just why that’s the case is open to interpretation.

Former communications minister Stephen Conroy has been singled out as a chief architect of this ailment, specifically for changing the eligibility criteria for subscriptions, and there may be some truth to that.

There is talk that Senator Conroy was informed of the limitations of the interim satellite service but had ignored the advice to pursue the goal of getting an estimated 250,000 customers, including schools and hospitals, on the service.

But there is another consideration here.

The Interim Satellite Service was designed to provide peak speeds of 6Mbps downlink and 1Mbps uplink. That’s a slight improvement on the speeds the ABG scheme was providing but the interim satellites aren’t designed to provide the same kind of services the Ka-band satellites can.  

NBN Co’s decision to sell services that closely resembled those that would be available once the Ka-band satellites are in orbit may have been the final tipping point.

You can’t give people 6 mbps a second and 50 gigabits worth of service and not expect performance to hit the wall, especially with the amount of capacity that was bought in 2010.

But playing the blame game serves little purpose. This is a hole that was dug a while ago and the best Ziggy Switkowski and his team can do is triage, and that means spending more money.