Introduction to NBN Co

NBN Co plans to offer a wholesale-only Layer 2 bitstream product. The purpose of the limited NBN Co product offering is to occupy as small a footprint as possible allowing Retail Service Providers (RSP) significant ability to innovate and develop new services1. What this means is that end users will not have a direct relationship with NBN Co but will purchase services from separate Retail Service Providers (RSPs).


NBN Co will not be a vertical monopoly! NBN Co will be a wholesale only provider. In short, this means NBN Co is excluded from selling services directly to the end user. One of the main reasons NBN Co is wholesale only is to prevent it from becoming a vertical monopoly. The danger of a vertical monopoly is with one company controlling the access network and also providing a retail channel they have a vested interest to prevent competition to protect their retail services. This will prevent NBN Co from becoming “Telstra 2.0″ as some have claimed2.

One of the major changes as part of the NBN from the end user standpoint is that with the NBN providing a nationwide wholesale platform the traditional role of an ISP will change. By only supporting Layer 2 the NBN will require the existence of RSP’s to assign layer 3 IP addresses and route IP packets. An RSP will replace ISP’s as companies which provide retail services to end users over the NBN.

These RSP’s can provide connectivity to the Public Internet or to Private IP networks (e.g. special purpose RSP’s for utilities, TV, corporate tunnels, etc.).

Today’s networked applications are obliged to operate “over the top” of the Public Internet (i.e. through the Public Internet and a single ISP). With the NBN this will still be possible, but also many applications which should not be carried through the Public Internet (e.g. utilities, business tails) can go through a special purpose RSP.3

Layer 2 bitstream services for business, and what it means for them…

Today’s broadband is “only” for Internet use and forces all applications to be carried over the Public Internet. With NBN this is only one of the options available. An example is a telephony, which via the NBN can be VoIP through an internet RSP (e.g. RSP-provided VoIP phone service, or Skype), or through an NBN connected special RSP (a “VoIP only telephony RSP”).4

NBN Co CEO Mike Quigley has ruled out the possibility of NBN Co providing Layer 3 services5. However, he did say that NBN Co may consider offering Layer 1 services in the future. “We’ve certainly looked at all of those [Layer 1] structures, we’ve looked at the implications of going various ways… we understand well the implications of moving towards that path. We’ll probably be doing some trials and experimentation… it’s not a closed issue one way or the other.”6


Choice and flexibility! With the new network, there will be virtually infinite opportunities for competition and different services to co-exist. At the moment you can churn from one ISP to another. With the NBN “…you can have several RSP’s at once (each on a different Ethernet port, for example, a service provider for Internet access, another for IPTV, another for corporate connectivity). So while competition/choice today consists of “serial monogamy” (churning from one ISP to another), competition/choice through the NBN consists of “polygamy/polyandry” (multiple simultaneous service providers).7” There will be much more flexibility. In short, this will allow the end user to use different RSP service offerings at the same time, and to change between service providers more rapidly8.

For more information on why NBN Co chose Layer 2 see this paper
At a presentation to the Australian Information Industry Association (AIIA) in August 2010 Quigley outlined what could be expected from the NBN in end-user terms (speed and monthly download quotas)9. The following table illustrates this.

Ultimately it is up to the RSP’s to decide what plans they will provide the end user. However, the experience so far has shown that this is the kind of plans end users should expect to see. Current offerings from iiNet and … show that …

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