Wednesday, 17 February 2021 08:45

NBN Co pricing review will lead to $2 per customer price rise: Budde Featured

Paul Budde: "It basically is a tax or a punishment for the use of data. This is contradictory to what broadband is all about." Paul Budde: "It basically is a tax or a punishment for the use of data. This is contradictory to what broadband is all about." Supplied

The options offered by the NBN Co in its latest pricing review consultation will lead to a price rise of $2 per customer no matter which option a retail service provider chooses, well-known independent telecommunications analyst Paul Budde says.

In a blog post, Budde pointed out that the NBN CO had always said its average revenue per user was central to its breaking even and this new pricing move would increase the ARPU, taking it halfway to the target which is between $51 and $53.

At the moment, the ARPU is $45 and had been at that level over the last few years, making it clear that the company still had a financial problem, he said.

The NBN Co, the company rolling out the national broadband network, issued its pricing review consultation paper on Monday, saying that it was seeking to "to deliver value, certainty and simplicity to the telecommunication industry and customers".

Prior to that, on 10 February, the company announced its half-yearly results for the six months to December 2020, during which time period it exceeded both revenue and EBITDA. That could put it in a position to achieve positive full-year results for the first time.

Losses fell from $2.817 billion for the first six months of 2019 to $2.113 billion for the first six months of FY2021.

Budde said the key issue in the pricing consultation — which he described as "a complex review of their already complex wholesale pricing structures" — was the cost of the so-called connectivity virtual circuit or CVC.

"The prices for these circuits increase based on data usage, so it is very difficult for RSPs to get a good grip on their costs," he said.

"It basically is a tax or a punishment for the use of data. This is contradictory to what broadband is all about; we want as many people to get the best quality broadband so they can use it for their work, business, education, tele-health, shopping, entertainment and so on.

"We saw the positive effects of NBN Co making more capacity available during the pandemic at no extra costs to the RSP and therefore to the users."

Budde said even he found it very difficult to get his head around the NBN Co's pricing. "The wholesale pricing is extremely complex and requires a team of dedicated experts within each RSP to manage their costs," he commented.

"The price review offers a few models the RSPs can choose from, but it also clearly indicates that a review of the future of the CVCs is not open for discussion.

"As mentioned you must be an expert to fully understand the complexity of the NBN wholesale pricing and I am certainly not claiming to be an expert here.

"Looking at it from a higher strategic viewpoint and having the users in mind, it looks like whatever model the RSPs select, in the end the prices will go up by $2 per customer."

Given this, it was not surprising that the industry was unhappy. "[It] confirms what I mentioned regarding no real changes, repackaging and, in the end, an increase in prices," he said. "This proposal also contradicts the global trend of lower prices in the telecoms market.

"New infrastructure-based technologies have made this downward trend possible now for a few decades. NBN Co wants to buck this trend and, through its monopoly, increase the price.

"At a minimum what we see happening around the world is that at the same price we do get a better quality (higher speeds). The NBN Co wants us to pay more for existing services, giving us nothing in return."

Budde also commented on two aspects of the results announcement: the payment of $3 billion to the government as part repayment of the $19.5 billion Commonwealth investment in the network and the fact that another 100,000 FttN premises would be upgraded to FttP.

"The repayment basically switches the money to its own debt that now stands at $22,6 billion," he pointed out. "Obviously the extreme low interest rates are making it much easier to pay back the government as well as borrowing money to invest in the FttP upgrades.

"On that topic, the extra FttP connections will bring the total number of premises that will be upgraded to FttP to about two million. This upgrade is planned to be finalised by 2023."

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Sam Varghese

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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