TPG 'contemplates' future of sub-$60 NBN plans

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TPG 'contemplates' future of sub-$60 NBN plans

Major repercussions possible in price-sensitive market.

TPG has threatened to pull its cheapest sub-$50 a month NBN plans off the market - and potentially all 12Mbps plans it offers, which could cause major repercussions for price-sensitive users.

The company - a major NBN player with retail brands including TPG, Internode and iiNet - has to date stayed largely silent on the impact that NBN Co’s 12Mbps squeeze has had.

This contrasts to other 12Mbps players like Vocus and Optus, which have previously gone public on the pressure applied by NBN Co to their most price-sensitive users.

That changed late Wednesday when TPG revealed the future of its cheapest plans are now also in doubt.

The first to go would be TPG’s non-unlimited 12Mbps plans. 

It presently offers a $29.99 a month plan with 10GB of data, and a $49.99 a month plan with 100GB of data.

“TPG may remove all NBN products in the market that have a monthly recurring charge of less than $59.99. For example, quota-based plans,” the company said in a submission to the Australian Competition and Consumer Commission (ACCC), which is threatening to set entry-level pricing on NBN Co’s behalf.

But TPG may not stop there; it could also pull the pin on its $59.99 a month unlimited 12Mbps plan.

“Depending on the outcome of this ACCC inquiry and market movements following [NBN Co’s recent wholesale price inquiry], we may also need to remove altogether the $59.99 plans (i.e. the ELBs),” it said.

ELB stands for entry-level bundle and is NBN Co’s current wholesale construct for a 12Mbps service.

It is essentially set up for voice-only services but retail service providers (RSPs) can also use it for broadband, albeit that doing so subjected RSPs to some punitive fees.

RSPs with legacy 12Mbps customer bases had little choice but to migrate those users to ELBs, but many RSPs have struggled to make it financially viable and have bailed out.

NBN Co has recently launched a modified ELB, and while it offers a small cost reduction, it does not appear to go far enough to make long-term 12Mbps offers any more viable.

“Until NBN’s new ELB was recently introduced, a $59.99 retail price point allowed TPG to only just break-even at an EBITDA level,” TPG said.

“Under the new ELB there is a reduction in NBN wholesale cost such that at 1.25Mbps per customer, the wholesale cost is now $37.”

However, TPG noted, the percentage EBITDA margin under the modified ELB still “cannot be said to be a commercial return that would allow the $59.99 retail price point to be sustainable long-term.”

That’s a problem for the government as it believes an entry-level NBN product should be available that offers unlimited data for $60 retail a month.

It’s also a problem for NBN Co because the network builder is banking on revised products like the modified ELB to remove the need for the ACCC to intervene and regulate entry-level plan pricing.

The ACCC is exploring entry-level pricing at a time of continued inaction by NBN Co when it comes to serving price-sensitive users.

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