NBN Co has internally modelled a simple flat-rate wholesale price for each of its speed tiers but hasn’t shared it with internet providers, saying it needs to be tailored for individual providers before doing so.
The existence of an internal mathematical model is of substantial interest in the context of the current NBN pricing review, and could be used to substantially drive change sought by the industry.
However, that depends if the modelling is ever released to retail service providers (RSPs).
After repeated questions, chief customer officer Brad Whitcomb told senate estimates that it is “possible” that NBN Co could meet its future revenue and average revenue per user (ARPU) goals with a flat wholesale price structure.
Currently, NBN pricing is made up of fixed and variable components, which come “bundled” but are subject to “overage” - excess fees.
The excess fees are paid when internet users consume more data, and RSPs are left to model and guess in advance how much of this extra capacity they will need to buy.
Most RSPs want NBN Co to abandon this complex model and charge a single flat-rate price for each speed tier.
Whitcomb said today that a flat-rate price structure is “possible” and that NBN Co have modelled this.
However, he said he was “not aware” if NBN Co had shared a schedule of flat-rate prices with RSPs, before later confirming that the company hadn’t.
“I do not believe we have provided the retailers with a mathematical model to that extent, no,” he said.
The main reason for this, NBN Co argues, is that a flat-price model needs to be tailored to each of the company’s 65 “primary” RSPs, though it did not explain why this was the case.
“We have 65 primary retailers, they all have different profiles in terms of what their customers are consuming, what they think is going to happen in the future, the speed tiers that they’re on etc. so there is no blanket [model],” Whitcomb said.
“There’s not a specific model that I would point to and say this applies to all retail service providers. So the answer is we do not have a model that applies to each of the 65 RSPs.
“We couldn’t run what-if scenarios until [we have that].”
It appears that NBN Co’s modelling needs further work before it is shareable with industry.
However, given the chorus of industry seeking flat-rate pricing, and the number of years they have publicly asked for it, it remains unclear why the models are under-developed, and why NBN Co sought to push discussion of this beyond FY23 in its current pricing review.
It's also unclear if NBN Co intends to share the modelling it has done with RSPs now as part of the current pricing review.
An NBN Co spokesperson has been contacted for comment.
On the extent to which NBN Co had discussed flat-rate pricing with RSPs, Whitcomb said only that NBN Co had “discussed the idea of moving more in the direction of less variability” in incurred costs.
However, he also argued that the company was already moving towards “flatter pricing” through its bundles.
“This move in the direction of a flatter price I would argue is already occurring because the variable portion that retailers are paying as a percentage of the total has gone down dramatically over the last several years,” he said.
It’s unlikely RSPs would see it this way, and indeed many have repeatedly said the bundles entrench cost issues, since they contain far less bandwidth than is needed by the average user, and therefore RSPs wind up progressively paying for more.