RSPs fork out to keep high-speed NBN customers on the books

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RSPs fork out to keep high-speed NBN customers on the books

Half-year of discounted broadband puts retailers in a tight spot.

NBN retailers are choosing to pay from their own pockets to keep existing high-speed customers happy - or to lure such customers away from rivals - by matching a steeply discounted price offer not meant for either customer type.

The commercial response to NBN Co’s temporary 'Focus on Fast' rebate scheme - which has led to temporary price cuts on 100Mbps and above plans, but only for new sign-ups and upgraders from lower speed tiers - raises yet more questions about the scheme's design.

Questions about the design of the 'Focus on Fast' scheme were first raised last week when Aussie Broadband revealed it was seeing some churn to Superloop from existing high-speed - but price-sensitive - customers wanting to access the discounted price deal.

It was not clear at the time if a customer churning a high-speed service from one provider to another would even qualify for the NBN rebate.

NBN Co has since confirmed to iTnews that this situation does not qualify for reimbursement.

“The rules of the rebate scheme mean that a RSP that adds a customer that was already on a high-speed tier at another RSP will not receive a rebate,” an NBN Co spokesperson said.

But with Superloop appearing at least partially successful in attracting churned services, one possibility is they are paying out of their own pocket to extend the discount offer as a customer acquisition exercise.

If so, they wouldn't be the only ones doing it.

Superloop declined to comment on how it is able to offer a six-month discount to non-qualifying new sign-ups such as existing high-speed users switching providers - and who is footing the bill for that to happen - citing commerciality arrangements.

It has made some cheeky references to the situation on LinkedIn, and specifically to Aussie Broadband not extending similar price cuts to its existing user base, in the past few days.

“At Superloop, our mission is to offer our customers a super fast, reliable and easy experience as it relates to their internet connection,” Superloop’s group executive for consumer Mehul Dave said to iTnews in a statement.

“We also do this at a price that is better than most. 

“We welcome and encourage Aussie Broadband customers to take advantage of this and switch over to Superloop. 

“Our existing customers are super important to us and we have propositions that allow them to experience faster speeds than the ones their current plans are capable of.”

iTnews has found another RSP that is offering the six-month price discount to all customers, not just to those that NBN Co will pay a rebate on.

For users whose services don’t actually qualify for the NBN rebate, MATE - which offers NBN services via Vocus - is picking up the tab.

“It’s a numbers game,” MATE general manager Mark Fazio told iTnews.

“Ultimately we did the numbers. We know that we can spend a lot of time and effort building a system to qualify if [a customer] gets [the discount] or not, and then spend a load of time explaining to customers why they don’t get it, which doesn’t mean anything to them. 

“So our view is the right thing to do is that anybody and everybody gets it, and we feel like we’ll get the benefit of the increased customer base and from the loyalty of the current customers staying longer. 

“That’s the decision of our business. Sure, it may take a little while to get that money back that we’ve given away upfront, but we’re comfortable with that because we have to be. We have to back ourselves.”

Fazio said MATE’s market strategy generally wasn’t to offer different prices to different customers.

“If you look at our history, we’ve never offered anything to new customers that we couldn’t offer the current customers,” he said.

“The purpose of that is, sure you might take a hit upfront because the [rebate scheme] from NBN Co only allows you to be incentivised for new connections, but the hit we take there hopefully and we’re seeing comes back with long-term customers - less churn, more loyalty.”

One possible reason why Aussie Broadband could not do the same is that its costs to absorb six months of heavy discounts on existing services would be much higher than for other RSPs.

Aussie Broadband dominates the higher speed tiers, and has exponentially more services than any other provider.

At last count, Aussie Broadband has 52 percent of all active 250Mbps services and 79 percent of all gigabit services.

On a wholesale-only basis - that is, not including its own costs, extending NBN Co’s discount to existing gigabit users would cost at least $1.1 million over six months; doing the same for the 250Mbps user base would cost at least an extra $521,000.

While it is common in telco-land for new price deals not to be extended to existing customers, the highly competitive nature of the NBN market is clearly driving different behaviours among providers.

That supports commentary from Aussie Broadband’s managing director Phillip Britt that the design of the ‘Focus on Fast’ rebate is problematic, insofar as it pressures RSPs to price-match on non-qualifying services in a market with thin margins to begin with.

“The way that NBN Co has structured those campaigns has basically been limited to new customers only into those speed tiers,” Britt told an earnings call last week.

“That’s created some price sensitive churn, [though] not a huge amount.”

Aussie Broadband declined to comment for this story.

iTnews was also unable to determine how apparent it is to an RSP getting a new sign-up whether that customer is simply churning a similar service from elsewhere in the hopes of getting a discount.

The implication here is whether it is possible or not for high-speed churns to be incorrectly compensated by NBN Co, despite them not officially qualifying.

Fazio said it was easier not to deal with the complexities of NBN Co's discount rules and qualification.

"We'd rather be focused on what we want to do - increasing our base, making sure that we expose ourselves to customers and get them onto our network," he said.

“The time that we take away from our goal by building systems to work out if a customer is eligible or not is just not worth it."

It appeared that RSPs did not receive much information from NBN Co when new customers signed up that would expressly indicate if those customers qualified for a discount or not.

NBN Co does ultimately provide information to RSPs about how many customers added were eligible for a rebate, though it is not clear when this occurs.

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