Infrastructure competition key to broadband price reductions

Stuart Corner
Sunday, 13 December 2009 14:00

IT Industry - Strategy

The Internet Industry Association (IIA) has released its ninth broadband index saying it shows that competition at the infrastructure level is essential to aggressive broadband pricing.

This, IIA says, suggests that price regulation of the NBN will be critical given its natural monopoly characteristics. According to the report, prepared for IIA by Venture Consulting, "Overall, our analysis of the Australian broadband market suggests that where infrastructure competition exists, as in ADSL2+ and wireless broadband, service providers will more aggressively price their offerings, driving down the access price for consumers. However, in the case of limited infrastructure competition such as ADSL, broadband access price remains high for consumers."

According to the study, high speed (17Mbps+) broadband has experienced significant competition due to continued decline in the price of the unbundled local loop and easier installation of DSLAMs, which has resulted in a proliferation of ADSL2+ service providers in high population density areas.

"Not surprisingly, the highest decline in pricing, 32 percent, has been experienced in the ultra-high usage segment (20 GB/month)," the report says. "Wireless broadband has experienced tremendous declines in pricing...driven by the continued strong competition in wireless broadband market and proliferation of HSDPA wireless technology."

In the three years Venture Consulting has collected data the cost per month of a 1Mbps wireless broadband service with 1GB of usage has fallen from $100.70 to $25.00, a decline of 75 percent. In contrast, low speed fixed broadband access prices have remained stable over the last three years. "We believe this is because competition is limited to the service level as competitors to Telstra resell its broadband product," the report says.

The Venture Consulting/IIA Broadband Index, now in its third year, analyses all broadband packages offered by four major Australian fixed ISPs (Telstra, Optus, iiNet and Primus), as well as the wireless offerings of Hutchison, Vodafone and Unwired. The total cost of broadband - start-up cost plus headline fees plus usage charges - for each broadband package and usage profile is calculated and compared. Usage profiles have been redefined for this edition and are now: 'Low' (1GB per month), 'Medium' (5GB per month), 'High' (10GB per month) and 'Ultra high' (20GB per month).