Monday, 15 February 2021 14:42

NBN Co begins consultation ‘with industry in two-part wholesale pricing consultation paper’ Featured

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NBN Co has released its “Pricing Review 2021 Consultation Paper 1”, which the company says “seeks to deliver value, certainty and simplicity to the telecommunication industry and customers.”

Before I start, the link to the NBN Co Pricing Review 2021 Consultation Paper 1 is here, and a reprinting of NBN Co's media release is further below, after some commentary of my own.

If there’s one thing Australians know about the NBN, is that it has been a mess, or at least, it has been so in the past. A mess of connection types, speeds, plans, wholesale prices for amounts of data being too expensive for providers who want to offer the unlimited plans that consumers expect, and more.

I mean, just ask people about their NBN experience, and you hear tales of woe, although that said, I know many people who are on the NBN and today, are happy with their connections. Some friends who connected to the NBN over the past couple of years expected problems with their connections and were pleasantly surprised when they were connected without any problems at all.

There's also much more competition for the NBN than ever before. Canberra has the iiNet Transact VDSL system that has been in place for nearly 20 years, delivering NBN-like speeds before the NBN was even conceived. Meanwhile, 5G Home Broadband is available from Optus and Telstra, and even Elon Musk's Starlink satellite broadband is coming to Australia later this year, with more satellite broadband from other players due this decade.

However, just as time wounds all heels, the healing passage of time has a tendency to bring things to a head, whereby change must come, or heads will roll.

And given that NBN employees are quite fond of their heads, or at least, so I’d presume, the time has come where NBN wholesale prices must be brought to heel, although this has happened before, with NBN Co lowering its prices over the years.

Indeed, in 2021 it is even possible to get gigabit (1000Mbps) NBN connections these days at introductory prices fox six months at $99 per month, with Brad Whitcomb, Chief Customer Officer at NBN Co offering some commentary (at the end of this article) on how prices have fallen for Internet connectivity since 2000 while prices for water, rent and fuel have risen.

To be fair, this definitely isn’t the first consultation paper NBN Co has had on pricing, it’s just the latest one which reflects the ever changing speeds and realities of running a national broadband network catering to Australians joining up via a variety of Internet providers.

And it must be said that the NBN as we have it today handled the 2020 pandemic better than many might have expected. It certainly wouldn’t have been good if half the country was on fibre and the other half on ADSL had the rollout not yet been complete, and of course, NBN Co has since pledged to upgrade those who can afford faster than 100Mbps connections to a fibre connection to their home by 2023, and has just added 100,000 more homes to the list last week. 

So, with my sarcasm aside, which I’ve seen other writers lay on much more thickly than my very light sprinkling above, what does NBN Co actually have to say about its new two-part plan? The PDF of Part 1 is here, and the media release is reprinted below:

“Over the past five years, NBN Co has more than halved its effective wholesale charge per gigabyte of data on average. The current two-year pricing roadmap and annual review continues to reduce the cost of data for customers. As part of its pricing review, NBN Co is consulting on the continued evolution of its wholesale pricing model to ensure the industry supports the future digital needs of Australian households and businesses.

“More than 50 internet retailers and consumer advocacy groups, such as Australian Communications Consumer Action Network (ACCAN), have been invited to participate in the consultation.

“This year’s consultation follows the completion of the Wholesale Pricing Review in November 2019, which delivered significant industry and customer benefits, including wholesale pricing discounts and additional data inclusions, the introduction of national CVC pooling, new higher speed tiers, and creation of the twoyear Bundles Discount roadmap.

“As a result of those changes, today 70 per cent of customers are on wholesale speed tiers of 50Mbps and above, and more than 16 per cent of total services purchased by internet retailers are on wholesale speed tiers of 100Mbps and above, driving a better customer experience.

“With more than 11.9 million residential and business premises now able to connect to the nbn network, and demand for higher speed tiers expected to further accelerate as a result of changing consumer broadband needs, the aim of the Pricing Review 2021 paper is to continue to find solutions to meet Australia’s digital future, with a focus on underpinning value, simplicity and certainty for the industry and customers.

“As part of the scope of this paper, NBN Co will examine possible alternatives to the current bundle discount for Access Virtual Circuit (AVC) and Connectivity Virtual Circuit (CVC), which respectively serve as an access charge based on speed tier and capacity charge.

“The consultation paper also seeks feedback on proposed wholesale discounts and data inclusions in the twoyear Bundles Discount roadmap to April 2023, solutions for a long-term low-income offer, repositioning the original higher speed tiers to meet the future needs of business customers, while also aiming to simplify how the company does business with internet retail providers.”

NBN Co Chief Customer Officer, Brad Whitcomb, said: “COVID-19 has further accelerated the digitisation of the Australian economy and society. Australians rely on broadband services to work from home, participate in online learning, stream entertainment, and access a range of essential services such as telehealth.

“We see this consultation as an important opportunity for the industry to ensure that we can continue to evolve our framework to meet growing data consumption and develop solutions to continue to support Australia’s digital future in a commercially sustainable way.”

Part A of the Consultation Paper

As part of the Wholesale Pricing Review 2019, NBN Co committed to providing a two-year Bundles Discount Roadmap to give the industry greater certainty, which led to significant wholesale discounts and data inclusions introduced across all speed tiers from May 2020 to April 2022. In Part A of the new consultation paper, NBN Co is seeking feedback on extending the two-year Bundles Discount roadmap by a further 12 months from May 2022 to April 2023.

Whitcomb said: “In May 2021, we will be proceeding with the planned higher data inclusions for the 50/20 Mbps, 25/5 Mbps speed tiers and Wireless Plus Bundles, which will range from 11 per cent to 20 per cent of additional capacity at no extra cost to retailers. On 1 December 2020, we brought forward significant additional data inclusions for selected higher speed tiers to meet the data demands of customers at that time.”

In the 2022-23 roadmap, NBN Co is seeking feedback on two options. Option one proposes maintaining the bundles discount effective charge across all wholesale speed tiers at the May 2021 levels3 and increasing CVC capacity inclusions by between 0.10 Mbps to 0.50 Mbps in May 2022 at no extra cost to retailers.

Option two proposes rebalancing the CVC charges for the 50Mbps and faster bundles by increasing the AVC charge by $2 but providing up to an additional $2.80 worth of CVC inclusions over and above the inclusions proposed in Option 1. This is effectively a 17 per cent to 29 per cent discount for the additional CVC inclusions.

Whitcomb added: “We believe both options deliver the industry real choice in managing future data demand.”

Part A of the paper will also seek feedback on repositioning the original higher wholesale speed tiers of 250/100 Mbps; 500/200 Mbps and close to 1000/4002 Mbps under the TC4 Bundles Discount to better serve small and medium sized businesses.

To achieve this, NBN Co “is proposing to maintain the bundle discount effective charge for the 250/100 Mbps wholesale speed tier, mainly used by small businesses, at $100 and increase the associated CVC inclusions from 3.5Mbps to 5.5Mbps in May 2022. For the 500/200Mbps and close to 1000/400Mbps wholesale speed tiers, predominantly used by medium and large sized companies, NBN Co is proposing to increase the CVC inclusions and provide more business-related benefits in return for a $30 and $50, respectively, effective charge increase in May 2022.”

NBN Co says it "expects to finalise and announce the outcomes of all the items in Part A of the paper by 30 April."

Part B of the Consultation Paper

In Part B of the new consultation paper, NBN Co will explore various longer-term strategic options to continue to evolve its wholesale pricing, with a range of potential alternative constructs as part of its commitment to delivering a fair and commercially sustainable framework. Changes to the company’s pricing constructs may require further engagement with regulators before they are implemented.

In particular, the company says it “is seeking comment from the industry on solutions for a long-term low-income offer, which further builds on industry engagement on this matter to date.”

The NBN Co Pricing Review 2021 Consultation Paper 1 is here.

I also received some additional information on NBN pricing, and how prices today are lower than in the past, with Brad Whitcomb stating:

“Consulting with industry on wholesale pricing has long been an important part of how we run our business.  It’s how we create balance between increasing customer experience, creating a level playing field for retailers, and ensuring we generate enough revenue to maintain and upgrade our network over time.

“And while this consultative approach often requires difficult trade-offs, we believe it has led to significant benefits for customers.

“For instance, customers are enjoying much faster speeds than ever before, moving from just 16 percent of customers on speeds of 50 and above in 2016, to more than 70 percent today. 

“And over that same time period, bandwidth congestion during the busy hour plummeted.  That, combined with our decision to boost speeds to cover retailers network overheads, means retailers routinely advertise peak busy hour speeds that approach the maximum plan speed.

“And on top of that, we have offered much greater value.  Since 2016, the cost we charge retailers per gigabit has dropped from 33 cents to just 15 cents per gig.  While the cost of virtually every other utility has gone up, our wholesale charge per gigabit is already less than half of what it was just five years ago – and we expect this trend to continue.

“So across the critical dimensions of speed, performance, and value, we have made great progress, and we look to build on that progress through this consultation.

“Now we have committed to an annual pricing review as part of our industry agreement – and a rolling two-year product and pricing roadmap to give industry more certainty on nbn’s pricing,” Whitcomb concluded.

Here are some additional key points from Accenture Research on broadband prices:

  • In the last 20 years, retail telecommunications prices have fallen markedly, and are now 20% lower than 2000 levels. This compares to a 60% increase in overall CPI (Consumer Price Index).
  • Significantly, retail telecommunications prices have fallen markedly during the period of the nbn rollout, dropping around 33% since 2013.
  • Retail telecommunications costs, including broadband, have declined significantly since 2000 despite substantial increases in other essential goods and services. Telecommunications prices have fallen 20% whereas electricity has increased 159%, water by 158%, rent 73% and fuel 38%.

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Alex Zaharov-Reutt

Alex Zaharov-Reutt is iTWire's Technology Editor is one of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.

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