Thursday, 22 February 2018 11:44

NBN Co's quest for more ARPU is ill-fated: network expert Featured

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The quest by the NBN Co to push up the average revenue per user is ill-fated as this would lead to a rise in retail prices, which would in turn, result in a drop in the number of paying customers, a network expert claims.

Robin Eckermann, who led the creation of TransACT and served as its chief architect during the 2000-2003 network rollout, said today in a reaction to an op-ed in these columns on Wednesday that the company's claim that one of the most obvious causes of poor performance lay in the inadequate CVC capacity that RSPs are purchasing was correct.

"NBN Co likes to blame the RSPs for this – but in my view, the RSPS are responding quite naturally to the high cost of CVC capacity set by NBN Co in its ill-fated quest to push up the average-revenue-per-user (ARPU) and thereby deliver an acceptable return on the network cost," he said.

Eckermann (below, right) said he had used the term "ill-fated" advisedly "because if ARPU rises, retail prices will also rise and some users at the affordability margins will relinquish fixed broadband in favour of ever more competitive and capable mobile alternatives".

He said this would reduce the number of paying customers and thereby drag total NBN Co revenues back down again.

"Return on investment will prove as difficult for NBN Co as it has for other Australian access network investments – such as the Telstra and Optus HFC networks and TransACT's original FTTK/VDSL network," he added.

In the past, Eckermann has been quoted as saying that the pressure to keep the cost of the NBN off the budget books by "clinging to the illusion that it will be a profitable investment has created a massive problem that will sooner or later have to be addressed".

He made a similar comment today, saying that "a key element of the way forward needs to involve unlocking performance by dramatically reducing or eliminating CVC charges, accepting that (in the words of Bevan Slattery) you can have any two, but only two, of the following three objectives: performance, return-on-investment and affordability.

"The 'book value' of the NBN needs ultimately to be written down to something more consistent with its earning potential - but such a writedown will be more than offset by the strategic benefits to Australia in its exploitation of the growing digital economy."

Eckermann claimed that until something like this was done, most of the NBN's transformative potential was being "forfeited by pricing policies that drove users to lower connection speeds and/or nobbled the performance of circuits during busy periods which, by definition, are when users most want connectivity".

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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