The federal government has taken the unusual step of specifying an expected retail price for a 12Mbps entry-level broadband service on the national broadband network.
Communications Minister Paul Fletcher said the end of a punitive fee charged to retail service providers that used NBN Co’s 12Mbps tier for broadband represented “good news for budget conscious households”.
NBN Co proposed earlier today to effectively reopen the 12Mbps tier to broadband services.
The company has spent two years trying to clear broadband users out of the tier and make it “voice-only”, even claiming - incorrectly - at one point that it was never intended for broadband use.
Some retail service providers still sell 12Mbps services, most likely via a legacy price arrangement.
They typically offer 12Mbps services for $50 a month retail, with 100GB of data quota (though one RSP, Flip, offers 12Mbps unlimited plans for $39.90 a month).
Fletcher said today that NBN Co’s rejigged 12Mbps pricing, if approved, “would allow for a $60 per month retail price with unlimited monthly data downloads”, and for it to be profitable for the RSP.
“The issue, in particular, is that we don’t have many retailers at the moment who are selling a 12/1 entry level product with unlimited monthly data; and one of the reasons is that it is very difficult for the retail service provider to make money with the current wholesale pricing,” Fletcher said.
“We do believe that this reduction in wholesale pricing will make it more feasible for retail service providers to offer that 12/1 product at a $60 per month price point in a way that lets them generate more profitability than has been the case to date.”
The $60 mark has long been a sweet spot for fixed-line broadband pricing in Australia.
Arguably, having an unlimited broadband product that retails at that level could take some of the heat off NBN Co, which has been under regulatory pressure of late to offer an entry-level product at ADSL equivalent pricing.
The question for regulators and others watching the space will be whether budget conscious households will pay the extra $10 a month to move to an unlimited quota service.
NBN Co is planning to address calls for broadband services for low-income households via a separate consultation.
Fletcher suggested that some half a million households in the NBN footprint were “budget conscious” and were staying off NBN for the moment.
The imputation was that they could be encouraged to join if they could buy broadband services with unlimited quota for $60 a month.
“It is important to make the point that’s a price point which is roughly in line with what people may be paying who are still on the existing ADSL network; and so this will allow people to move across at broadly the same price point, of course on a network which is now available to most Australians, and with the roll out due to complete next year, and a network that is considerably more reliable than the old Telstra copper network,” Fletcher said.
Fletcher said there was a “prospect of getting some of those 500,000 households to come onto the NBN”.
“I’ll leave it to NBN Co and the retail service providers to make the precise predictions but it stands to reason that if you’ve got more attractive pricing with that unlimited data, no monthly data download limit, and if we can have more retailers in the market offering that plan, I think we’ve got a good chance of getting some of those people to come across to the NBN.”
NBN Co has said it could have the rejigged 12Mbps pricing in the market as early as October.