Vocus warns NBN price rise at odds with household spend

An NBN Co plan to raise the price of its popular 50Mbps product would add $6.60 a month in wholesale cost-to-serve for Vocus, at a time when some customers have already downgraded their plans to save $5 or $10 a month.

In a submission on the revised NBN special access undertaking (SAU), sighted by iTnews, Vocus said its wholesale costs for a 50Mbps service would rise from $45.40 to $52 if NBN Co was allowed to raise prices for the tier.

This factors in a $5 a month hike in the plan cost itself, but also extra connectivity virtual circuit (CVC) costs caused by a reduction in the amount that comes bundled with the plan.

Importantly for Vocus, some of its price-sensitive customers have already dropped down on their broadband plans to save $5 or $10 a month, and now NBN Co wants to raise the price by a similar amount.

Vocus fears that price rises by NBN Co could drive some customers back to 25Mbps services - which could have high underlying variable costs - or away from the NBN altogether.

“In the context of current cost of living pressures, we have already seen customers choosing to downgrade broadband speed tiers to save $5 or $10 per month,” Vocus said.

“Vocus Retail saw a doubling in monthly downgrade requests between March and June 2022, as the Reserve Bank increased the cash rate and banks followed with interest rate rises. 

“Of the users who chose to downgrade over this period, the majority downgraded from a $75 50Mbps plan to a $65 25Mbps plan (30 percent of total downgrades) or $55 15Mbps plan (22 percent of total downgrades). 

“Close to a third downgraded from a 100Mbps plan to a 50, 25 or 15Mbps plan.”

Under previous iterations of the SAU, Vocus has lobbied for price reductions on 50Mbps plans and below.

As it stands, if the ACCC was to sign off on NBN Co’s latest revised SAU, pricing on the 50Mbps and 100Mbps tiers would essentially converge - which is likely to be a purposeful push to get more of the NBN user base up to 100Mbps plans, although this won’t work if customers’ lines do not support these higher speeds, or customers lack the use cases or budget for that tier of service.

In its submission, Vocus suggested pricing the 25Mbps tier in a way that retail pricing could come in at a more affordable $50 a month.

The telco also said that CVC inclusions on 50Mbps and below tiers should keep pace with customer demand for bandwidth.

“It is not reasonable that NBN Co is only proposing to increase the CVC inclusions associated with the 25Mbps and 50Mbps speed tiers at six-monthly intervals at 50 percent of the usage change,” Vocus said.

“This approach is yet another way of increasing prices for low-speed NBN plans. 

“To meaningfully mitigate cost uncertainty for RSPs and protect consumers, CVC inclusions must, at a minimum, be increased in line with end user demand.”