As the election looms, the IIA has called on the incoming Government to ensure access to the NBN is offered at a low enough cost to ensure its widespread use.
“The concept of build it and they will come’ will not work if user adoption and the subsequent economic benefit falls short of expectations,” says Peter Lee, CEO of the IIA.
“The IIA believes the NBN pricing strategy should be set in a way that promotes adoption and sustainability over and above profit, particularly for a taxpayer funded national infrastructure project the size and nature of the NBN.”
Lee points out that after the last election, one of the main reasons independent Tony Windsor gave for casting his vote with the ALP was the NBN.
“Since then the NBN debate has been largely centred on cost vs technology vs the length of time it will take to build the NBN. The Coalition says it deliver fast broadband to the Australian public faster than the ALP’s plan, but at slower speeds because of its FTTN technology.
“The Coalition’s central argument is that if the economic imperative to provide superfast broadband is so great that the cost of fibre to the premises is no object, then the Government has an even greater obligation to provide superfast broadband much sooner than what we’re seeing under the current plan.”
Lee says there is some logic to this argument, but that both parties are missing an important point. “The Government’s original plan was to create conditions that support greater competition and choice for consumers.
“Consumers have been conditioned to paying certain price points for utility services, like electricity and gas. Internet access is no different,” says Lee. “The current pricing plan does little to incentivise anyone other than the early adopters.
“The incoming government should test the current NBN pricing plan and provide a pricing methodology that’s relative to current and forecast growth in Internet usage rather than just speed.
“NBN Co has had numerous attempts at providing the Australian Competition and Consumer Commission (ACCC) with the price and non-price terms and conditions on which it plans to sell its products and services to the industry. But it still hasn’t provided any clear commitment on how and to what levels its CVC prices will decrease over time, in order to promote cheaper retail pricing and adoption.”
A Connectivity Virtual Circuit (CVC) aggregates multiple Access Virtual Circuits (AVCs), or end-user connections, back to the Point of Interconnect. The CVC is shared among nominated AVCs and allows the Access Seeker to manage network contention.
Lee points to a recent paper written by telecommunications economist John de Ridder, in which he says: “the NBN needs an entry level retail price that encourages take-up and use of the network. Without such a plan there will be around 250,000 fewer broadband users.”
The IIA has issued a statement calling on the incoming Government to provide details on how it plans to accelerate progress on the NBN rollout. “The worst possible outcome for the NBN and the Australian economy would be for the rollout timeframes and costs to blow-out to the extent claimed by the Coalition.
“Factor in low user adoption and we could see the NBN fail to achieve its intended outcomes and be mothballed like a number of other ill-fated long-term infrastructure projects.”