NBN Co digs in on 12Mbps 'class war'

NBN Co is digging in on its bid to force 12Mbps fixed-line users up to higher priced products, with the company all but confirming it wants to vacate the tier of broadband users.

iTnews reported last month that about one million 12Mbps users will face a choice between price and performance in October, when NBN Co’s permanent new price construct comes into effect.

To move up to the new price construct, 12Mbps users must agree to pay $45 a month wholesale - and likely $60 retail, up to twice what they pay now.

Retail service providers like TPG have indicated the customers won’t be able to afford to move. Instead, these customers face being left on the old price construct, but with degraded internet services.

A wide range of internet providers are concerned with the situation and have called for change, but NBN Co is digging in on the issue.

“We’re of the view that the 12Mbps was never intended to be used as a broadband service,” CEO Bill Morrow said today.

“It was largely there to provide a voice-grade capability and the pricing was actually structured to where there was a certain amount of ample CVC built into that for people that just needed a voice-only capability.

“But because that’s a cheaper price than the 25Mbps [tier] you saw a marketing push and a land grab phenomena stage of this massive churn event we have in this country.”

Morrow confirmed that very few 12Mbps users had moved up to the new 50Mbps NBN price construct to date.

Most customers moving to the new 50Mbps tier were previously 25Mbps users.

“There’s obviously less movement [of 12Mbps users] and part of the reason is some of the RSPs pushed this product for the lower end of the market,” Morrow said.

“They’ve advertised some of these plans for $30 a month so they have to keep the cost down and therefore they buy from us the cheapest available product.

“The RSPs that are really pushing that 12Mbps [tier] are going to be reconsidering their approach.”

Morrow predicted that 12Mbps users would start to move, but it was unclear whether that would be to much more expensive NBN services or elsewhere.

TPG - which is among the worst impacted by NBN Co’s new pricing - last night unveiled an aggressive mobile data product for its forthcoming 4G network.

It will offer 1GB of data per day at full-speed and then an “unlimited” 1Mbps data service for the rest of the day for under $10 a month.

Such a service could prove particularly attractive to fixed-line users displaced by NBN Co’s bid to move away from servicing a large installed base of low-margin 12Mbps services.

Fixed wireless bundles

Morrow also said today that NBN Co is “reviewing” whether to create a new price construct bundle of AVC and CVC for fixed wireless users.

Currently, NBN Co’s new price construct applies only to fixed-line users; RSPs including Aussie Broadband have consistently called on NBN Co to afford the same price and performance upgrades to the fixed wireless footprint.

“We are reviewing fixed wireless bundles right now and will be talking to our RSPs soon about what is the proper construct,” Morrow said.

“Now that we’re learning about the [effect of] changes to prices in the fixed line technologies and we know fixed wireless and satellite is different, what can we do from a pricing point of view and modelling point of view that makes sure the [fixed wireless] end user gets the best possible experience and that the RSPs get the value they need and NBN Co is still managing its return for its shareholders.”

NBN Co today reported revenues of $1.4 billion for the nine months ended 31 March 2018, and average revenue per user of $44 a month.