Turnbull's NBN pricing scare gathers momentum

Stuart Corner
Tuesday, 23 August 2011 11:59

Opinion and Analysis

Facts are fast giving way not just to speculation and opinion but to outright falsehoods as the latest Coalition NBN scare campaign gathers momentum.

Yesterday shadow communications minister Malcolm Turnbull issued a lengthy press release claiming that NBN Co was seeking the freedom to hike its wholesale prices at rates way above inflation.

The genesis of his opinion was a discussion paper issued by NBN Co in July to seek industry feedback on the special access undertaking it intends to lodge with the ACCC. Contrary to some reports spawned by Turnbull's comments, this SAU has not yet been lodged: the window for feedback expired only on 19 August.

The same report quoted Turnbull saying: "In terms of the super fast speeds '” up to 100Mbps '” the speeds which we were told were going to be the Nirvana, the Holy Grail of Internet access, those prices are going to go up, and up, and up."

The only thing getting carried away to stratospheric heights here is Turnbull. The SAU is a document designed to provide pricing certainty over a 30 year period in the face of what must clearly be significant unpredictabilities. It does not presage inevitable price rises. NBN Co says it is sticking to its promise to reduce prices as usage increases.

As NBN Co points out "the SAU is a voluntary set of constraints that NBN Co is offering to enter into with the ACCC in order to provide transparency and clarity to industry in relation to price-setting to achieve cost recovery over a period of 30 years'¦[It] includes a commitment not to increase the [price of] the basic service offering for five years, and to limit any possible increase in the price of key services to less than CPI over the 30 year period."

Furthermore, its acceptance by the ACCC does not give NBN Co carte blanche to raise prices within the constraints set out in the SAU. "The overall package of pricing commitments made in the SAU will need to be approved by the ACCC, and they would only do so if their primary concern - that pricing changes are in the long-term interests of end users - is met," NBN Co says.

NBN Co claims: "This SAU establishes unprecedented certainty for RSPs in their wholesale input costs and allows them to plan with certainty for the competitive environment the NBN creates."

It that those seeking insight into pricing of its services going forward should refer first to its Corporate Plan. "The Corporate Plan is NBN Co's current projected estimate of revenue, costs and service take up and NBN Co stands by the pricing intentions outlined in the plan - to reduce prices over time as usage increases.

That, of course, is the great unknown: usage. And several factors are combining against the NBN: the cost of mobile broadband is coming down; the bandwidth of mobile broadband is going up; the need for mobile access to broadband has grown and is growing at a rate beyond anyone's expectations of a few years ago.

Seems to me the NBN is going to need some really compelling high-bandwidth video applications to fend of mobile competition, but if the predictions for the growth in video traffic are realised, this should not be a problem.