No-frills NBN provider aims for the tech savvy

A group of telco consultants and engineers in Victoria is planning to launch a not-for-profit internet service provider in an attempt to provide cheap access to the National Broadband Network for like-minded people.

The nascent group, dubbed 'No ISP', gained cooperative status under Victorian law earlier this month, enabling them to recruit members and provide services without the financial requirements of a standard company structure.

It will offer plans on the NBN with minimal margins, facilitated by near-zero costs, non-existent staffing and none of the support or service structures now commonplace in the telco and ISP industries.

In effect, No ISP plans to offer NBN as a utility, rather than a service.

"We treat [the NBN] as a utility that's available to all — there's no differentiation in the way people are connected, or managed or set up — it basically only comes in one flavour," said Phillip Stevens, a Cisco systems engineer by day and secretary of No ISP by night.

"If that's the case, it truly can be treated as a fully standardised utility ... you don't add the service elements on top that telecomms companies have been doing for their own specialised services — you have someone there to teach you how to do everything associated with your service, whereas with a utility it's a much more straightforward service.

"It works, it's there, you turn it on and you use it."

Under Victorian legislation, No ISP is able to cover its own operating costs as a cooperative but unable to make or report a profit to its members.

Instead, those who sign up will be offered a share in the cooperative worth $1200. Stevens said they would be required to pay a portion of this to cover membership and could pay additional membership fees in future — to be determined democractically by members — to cover unforeseen financial costs.

"I think it's quite a bit different to the way the ISPs are going because they realise the ubiquity of the NBN and the fact that it is a generic service, so they're currently working very hard to capture added services they can bundle in to protect their margin," Stevens said.

"We don't need to do that because we basically have as little overheads as we can get away with."

The organisation currently has no staff — it's founding board members are all volunteers and are likely to stay that way.

All core aspects of the business are outsourced where possible: NBN connections will be funneled through a sub-wholesaler on the network like Nextgen networks, while it has signed onto a hosted billing and operational support system from Aussie vendor Inomial.

Though professional legal, accounting and systems support staff may eventually be added to the cooperative's roster, No ISP plans to remain a barebones, no-frills provider.

"To be frank there isn't a lot of magic in internet services anymore and that's why the margin is failing," he said.

"In the old days ... you needed technical staff, you needed support people but frankly, with a wholesale provider, there's nothing that needs to be done in terms of buying any kind of router of any sort."

According to Stevens, the cooperative plans to sign up its first customers — or, more aptly, members — to the NBN over the next several months once contracts are secured.

However, the key differentiation between No ISP and other ISPs isn't in individual membership but instead through the community the group hopes to grow over time.

No ISP will not always compete successfully with ISP mainstays on price — it is currently proposing an entry price of $110 per month for a terabyte plan on 100 Mbps down and 40 Mbps speeds over the fibre network.

An equivalent plan can be purchased for $10 less a month from iiNet, due mainly to the larger ISP’s existing scale and direct connection to the NBN.

Instead, No ISP hopes to instill a community attitude that could bring further advantages like the ability to trade excess data quota between users while providing community support between members.

Read on to page two to find out how No ISP members will trade excess download quota for discounts off their monthly bill.

Cap trading

Like most current residential plans, those on a No ISP-delivered NBN plan will be capped to a slower speed once they reach their download quota; the group currently plans to shape to 1 Mbps download speeds.

Unlike most internet service providers however, No ISP will allow users to 'trade' excess download quota within the group in exchange for discounts off their monthly bill.

No ISP will facilitate the trades but allow for a market-based price depending on supply and demand, which Stevens said he expects to ebb and flow over the course of a month.

"Pretty soon we'll see a small but useful inter-member trading scheme set up such as they will be able to do that trading process," he said.

"It's a zero-sum game for us — we're still paying the total to the wholesale but within the members group they can trade and get what they want."

Stevens contrasted No ISP to standard telco practices, which he said offered a terabyte cap to customers but realistically bought a smaller amount of quota per user from their wholesale provider in an expectation that most users would not reach their cap.

A similar tactic has been used by internet service providers offering unlimited download quotas, pricing the offerings cheaply and expecting small-time users to outweigh heavy downloaders.

"We will be buying a terabyte [per user-based terabyte plan], so we would actually like to see it shared and consumed," Stevens said.

"From the point of view of game and trading theory, watching what happens with that market will be quite an interesting lesson and I hope it does enable us to track how people are actually using it, and becomes a way for people to be able to maximise the benefit out of the service."

Community support

Support, too, will be minimal at No ISP. The organisation will employ no real support staff and provide no telephone number.

Any faults are expected to be lodged through a web interface, most of which will then be shuffled to the sub-wholesaler for allocation or fixing.

Stevens said he saw "no benefit" in providing traditional telephone support in an NBN world — largely because an NBN or power outage will also take out landline phones, while phone queues on mobiles quickly become an expensive exercise.

But members can opt in for a second level of support for the applications and hardware hanging off their NBN connection. This, Stevens said, would be provided at an extra cost by other members providing community support.

"A number of the people we've been talking to say they feel comfortable to help out their friends in the street, who always come to them when they try to set something up and it hasn't been able to work, Telstra hasn't been able to help them," he said.

"It may not be commercially exciting but certainly for some of the guys we've been talking to saying, 'I'd like to go up and down the main street and say, if you want help with your internet I can help you, I'll charge you an extra $10 a month and here's my mobile phone number.'

"That was one of the first questions posed to me as No ISP — are we going to be upset if people want to resell No ISP membership? If there's some internal membership between the members, we don't mind, and we went from not minding to wanting to facilitate that."

Stevens said one purpose of No ISP was to create a "collegiate structure" on which members could feed off each for ongoing support, new product ideas and influence in the technology provided by the ISP.

"I guess the focus is we're trying to be as transparent as possible, and at the end of the day any member is able to contribute and if they don't feel they don't like what's going on, they should be able to stand up and say 'hey, it's not going the way I'd like it to go'," he said.

Head to the next page as we explore whether new internet service providers and business models are viable in a post-NBN world.

Although the community-based telco model Stevens and No ISP chairman Marc Boschma hope to build is not entirely new, No ISP remains a far cry from the for-profit, traditional telcos that currently dominate the telco space.

The group isn't alone, either, in attempting to use the ongoing government-led reforms of the telco sector to make a new entry into the industry.

They are joined by the likes of AusBBS, another "NBN-era ISP" that has recruited former Ozemail executives in hopes of rekindling the success it had two decades ago.

More are set to come, both in the form of fresh ISPs, and over-the-top players that could bundle utility-style internet access over the NBN as a side product.

But not all are convinced new, small-scale ISPs — whether chasing after profits or not — are financially viable in an era dominated by very few, high-scale telcos.

The telco sector as a whole has continued to experience significant consolidation as those in significant positions seek to gain scale before the NBN becomes an entrenched access network.

Former Internode managing director Simon Hackett has pointed to the financial difficulty small ISPs were likely to face in connecting directly to the national network.

While sub-wholesalers are seen as taking some of that sting out of the wholesale cost, others have argued the largest ISPs in the sector would simply squeeze the market share from newer entrants.

"The reality is that the larger ISPs — the top five — are really goin to monopolise that with their ability to buy huge chunks of bandwidth for their residential clients and use that bandwidth and capacity that's largely used at night and use it during the day for their business clients, and offer it at a cost service," Steve Crockett, chief technology officer at small business ISP Anittel, told iTnews.

"I think there might be a couple of small exceptions — you might have somebody like Bendigo [Community Telco] ... they are kind of the dominant telco outside of Telstra in that Bendigo area, and I think that they are big enough in that areas as a telco.

"I kind of think there are more telcos like Bendigo that will likely get acquired before that occurs."

Stevens acknowledged that the big four — Telstra, Optus, TPG and iiNet — were likely to retain the majority of the broadband market for the foreseeable future.

But he argued a non-profit venture could work off smaller margins and not require a hight cost base from users.

"To be perfectly clear, we're not talking a membership base in the hundreds of thousands, we're talking a membership base of less than 100,000 and probably more towards 10,000 to 50,000 people when the NBN is fully scaled," he said.

Telco consultant and former Platform Networks managing director Dave Hooton said over-the-top players — rather than mere utility internet service providers would likely play a larger role in the ISP market in future.

Household names including Woolworths — which already offers a pre-paid mobile service — are expected to compete with the likes of iiNet and Optus for NBN subscribers in the near-future, while technology vendors such as Apple could more closely control customer relationships by offering internet access.

However, the value-added services — rather than a pure internet connection — would likely become a core reason for competition, Hooton said.

"I think what's ultimately happening is the market is being stuck in a full circle," he said.

"When small ISPs were originally starting up, they were always starting up in the regional areas; that was a technology reason first and foremost, because with dial-up you needed to have a local landline.

"But I think by default it's due to the [capital expenditure] involved in becoming a national carrier that the regional ISPs or something with a real niche is going to be what's required to start a new business in that game.

"I think it would be possible to do but I think the way that the businesses starting up are going to be completely different."

But while he noted that niche players would still have a place in the ISP industry in future, Hooton said the industry was unlikely to reach the approximately 370 telcos and service providers reported to be in the industry by the Australian Bureau of Statistics in 2010.

"I'm happy to be proven wrong," Hooton said.