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Monday, 19 September 2011 15:04

iiNet pricing portends a non-competitive NBN future

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It is probably unfair to single out iiNet when it comes to pricing for NBN services as its charges are comparable with what it charges for DSL and pretty much in line with its competitors. However, $50 a month for a basic 12Mbps service does not bode well for a future where NBN will be the only fixed line access available.

 

At this point in time, where a truly ubiquitous NBN is still just a glint in Senator Stephen Conroy's eye, a good portion of Australia's population who don't live in the bush have a choice of fixed line broadband.

If you live in the major mainland capitals, and not halfway up a mountain, you're likely to have a choice between an advanced version of DSL or cable, from a number of providers.

It is true that the DSL wholesaler is just one provider - Telstra - which is then resold by a number of retail ISPs but tough regulation has enabled many ISPs, including some relatively small ones, to compete successfully with Telstra's own retail ISP BigPond.

There are also two HFC cable providers, Telstra and Optus, who deliver reliable fast broadband services, as well of course pay TV over their networks - although these days Optus seems to want to keep this a secret.

As a result of all this choice for us city dwellers, good quality broadband services can be had for relatively low prices. For instance, TPG ADSL2+ with 50GB is $30 a month, Internode ADSL2+ is with 30GB is $30 when bundled with a standard telephone service, Primus offers ADSL2+  for $30 bundled and $40 unbundled with 40GB (20GB peak).

HFC cable prices are not too bad either. Even the perennial over-charger Telstra offers BigPond cable services of up to 20Mbps (generally averages around 12-15Mbps depending on location) with 50GB upload/download for $50 - as long as you have a Telstra phone - with a $10 a month discount for each additional Telstra service such as mobile and Foxtel.

If you're lucky enough to live in Melbourne (depending on your perspective) you can get BigPond Ultimate, which offers speeds up to 100Mbps with 50GB upload/download for $60, with the same provisos and discounts as the standard BigPond HFC service.

Right now, some of these prices may not seem all that different to the entry level NBN offering from iiNet. Well actually, they are pretty close. iiNet's entry level 12Mbps service with VoIP phone costs $60 a month ($10 for the VoIP including the calls). So what we have today, where competition still exists, are ISPs starting to offer NBN services at comparable prices for comparable services that we already have on other networks.

However, let's imagine a future where an adequately functioning national infrastructure of copper and HFC cable has been either ripped out or shut down and there is no fixed line competition to the NBN. In addition, carriers are prohibited from marketing advanced wireless services as competition to the NBN.

In order to make the NBN network viable, the Federal Government has simply mandated that all existing viable competitors should cease to exist. What that means, is the NBN simply could never compete on its own merits in a free market therefore perfectly good service providers have to shut down their perfectly good services.

Thus, we are left with a government-owned monopoly that sets wholesale prices for one national network, which only a few large retail service providers can access because of the small number of access points. In addition, it is likely that the government monopoly will reserve the right to retail directly to the government sector, cutting the private retailers out of the picture.

Is it just me or is this beginning to resemble that state of telecoms in Australia back in the 1950s, 60s and 70s when we had one government-owned telecommunications provider? Do any of the young turks out there have any idea of what the service levels and prices were like in those days?

Most of us are familiar with the main way governments raise revenues to balance their budgets. It's called tax. Is it too difficult to imagine a scenario where the sole communications network owner in the country begins to realise it has found another way to balance the books - and where will the competing forces to keep prices in check come from? Government mandated regulators perhaps?

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Stan Beer

 

Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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