NBN Co's low-end price offers lead to disagreement

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NBN Co's low-end price offers lead to disagreement

Leaves some enthused, others underwhelmed.

NBN Co’s wholesale pricing review has led to disagreement in industry on how best to service “low-bandwidth users”.

The network builder is proposing a fee change to its existing 12Mbps Entry Level Bundle (ELB) that is meant to allow retail service providers (RSPs) to offer an ADSL-equivalent $60 a month product.

It is also wanting to revive 25Mbps as an intermediate-priced option between 12Mbps and 50Mbps services.

But there is disagreement in the industry on how effective either product will be in meeting the needs of low-bandwidth users.

The 25Mbps product owes its cheaper pricing to a small amount of connectivity virtual circuit (CVC) bandwidth that it comes bundled with. 

Aussie Broadband welcomed “the introduction of a rebalanced 25Mbps bundle to more effectively service low-bandwidth users”, but said the proposed 1.25Mbps of included CVC would be too little to ensure those services performed well.

“We believe the CVC allowance should be increased to a minimum of 2Mbps to meet the current needs of these consumers,” Aussie Broadband said in a submission to NBN Co.

“Our current 25Mbps customer base requires 2.09Mbps of CVC per user on average, and we expect this to increase by an average of 40 percent year-on-year in line with the trend in fixed line data consumption over the last four years.”

The Australian Communications Consumer Action Network (ACCAN) - a long-time voice for low-bandwidth users - raised concerns that cutting the amount of CVC with a 25Mbps would lower one price but raise it elsewhere.

“ACCAN is concerned that the decrease in inclusions will merely shift the costs of service delivery from the bundled price to overage charges,” it said.

That would mean that while RSPs saved on the bundle cost, they’d wind up having to buy extra CVC bandwidth outside of the bundle, and therefore the price of 25Mbps services would stay relatively high.

“While the changes may result in short-term reductions in the cost of services, it is likely that as bandwidth demands increase that the underlying cost will increase,” ACCAN said.

“ACCAN does not consider that the proposed rebalanced 25Mbps bundle is likely to meet the needs of consumers and that the included CVC allocation will be insufficient to ensure quality of service.”

It called on NBN Co to offer a 25Mbps service with 2Mbps of bundled CVC for $37 a month wholesale.

Telstra went in a different direction altogether, arguing that the goal should be to bring all users onto cheaper, higher speed plans, instead of making low-speed tiers attractive.

“Telstra welcomes improvements to NBN Co’s pricing designed to bring the wholesale price closer to a level which enables us to offer retail services that are both affordable to customers and financially viable for RSPs to supply,” it said.

“However, the proposal to reduce prices for low-speed 12/1Mbps and 25/5Mbps speed tiers, whilst not addressing the headline price and affordability of 50Mbps services, risks a perverse outcome by creating incentives that could return the market to the ‘pre-bundles’ period in which a higher number of Australians were migrated to the NBN on slow-speed 12/1 plans. 

“Customers migrated to 12/1 and 25/5 speed services are more likely to feel dissatisfaction with the speed and price of their service compared to customers on 50Mbps and above. 

“At a time when Australians are increasingly demanding on the opportunity of faster services, and where alternative technologies are meeting this demand, this proposal runs contrary to the objectives of the nbn and risks increasing the number of Australians on slow speed services.”

NBN Co’s proposed modified ELB for 12Mbps users didn’t fare much better.

Aussie Broadband predicted it might be useful for specific markets, but that take-up would be low single digit, at least as far as Aussie is concerned.

ACCAN was equally unconvinced the modified ELB was that attractive.

“ACCAN foresees that a limited number of retail providers with a significant contingent of price-sensitive, low data users may find the modified ELB to be a feasible service to offer,” it said.

“In offering this service, ACCAN considers that these services are likely to see the re-emergence of data caps and quotas in order to constrain peak demand, and thus represent a regression in service offerings. 

“Although a limited data service offering is likely to appeal to those households who are extremely light users of internet services, ACCAN does not consider that the service offering will be suitable for the vast majority of consumers. Accordingly, we do not believe that the service can feasibly be offered as a mass market product. 

“Were this service offering to re-emerge as a mass market product, ACCAN is concerned that the service would not meet the expectations of most consumers in terms of speed or data constraints. 

“Accordingly, there is a risk of a repetition of the poor service outcomes faced by consumers prior to the movement to bundled pricing due to under provisioning of services or the mis-selling of 12/1Mbps as a high-speed broadband service.”

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