NBN users won't pay for high speeds, economist says
- 08 March, 2013 12:58
- Comments 17
Former Telstra chief economist John de Ridder has said consumers will not be prepared to pay more for higher speeds on the National Broadband Network (NBN).
de Ridder, who is now a telco consultant and economist, told ABC Radio’s PM program on Thursday that there is the “wrong idea” about charging different prices for different speeds on the NBN.
“People are not going to be prepared to pay more for speed. They don't do it now. What they're doing is replicating the existing situation where a lot of people have access to more broadband speeds than they are prepared to pay right now,” he said.
Instead, de Ridder suggested a better pricing structure would be to charge users on the amount of data they use on the NBN, just like gas and water is priced.
Mike Quigley, CEO at NBN Co, defended the current pricing structure, stating people would be reluctant to sign up for the network if only fast speeds and the higher price for those speeds were offered.
He said not every consumer in Australia will want the same speed and it would not make sense to offer them 100Mbps, the fastest speed on the network.
“We talked extensively with our potential customers and retail service providers about what are the sorts of tiers that make sense and what sort of product offerings, and this is what we thought was the right answer,” he told PM.
However, telco analyst Paul Budde told the ABC radio program that there is no longer a “political need” for the 12Mbps service now that the government has introduced a 25/5Mbps speed on satellite and fixed wireless.
“You know, [a 12Mbps speed] was politically needed to say everybody gets the same, at the minimum get the same service. Now the government can safely say the minimum service can be lifted to 25,” he said.
In October last year, Jim Hassell, former head of product development and sales at NBN Co, told a Senate Estimates committee that the speeds consumers have chosen for the NBN have differed from NBN Co’s initial forecasts.
NBN Co originally suggested the highest take-up would be on the lowest speed – 12/1Mbps, with 49 per cent of users opting for this speed and only 18 per cent on 100/40Mbps. Instead, Hassell said there has been a take-up rate of 44 per cent on 100/40Mbps.
However, he conceded it was too early to tell if this was indicative of longer term trends.
“It is too early to say whether that trend is going to continue, so we monitor that pretty closely and we’d like to go and complete some areas so we know what that map will actually be,” he said.
David Kennedy, research director and principal analyst at Ovum, previously told Computerworld Australia that while there have been higher than expected numbers of people signing up to 100Mbps plans in early rollout areas, they tend to be consumers who want high speed broadband regardless of how it is delivered or how much it costs.
The real statistics on what speeds consumers want remain to be seen, Kennedy said, and won’t happen until mass migration to the NBN occurs when the copper network is shutdown.
This is when the “laggards” connect to the NBN and most likely sign up to entry-level plans, he said.
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Comments
Gordon Drennan
1
NBNCo is run by a group former enterprise market people who may well have a good understanding of that market, but they have a very poor understanding of consumers. They are making one wrong marketing decision after another. And instead of listening to other people who dounderstand, they go into defensive mode. Fixing this issue of their lack of relevant expertise of the market they are selling into is the most important thing that needs fixing. It is far more important than technical issues like FTTN versus FTTH.
The NBN needs either no price graduations based on speed as de Ridder suggests, or a wider price range between the slowest and fast speeds so there's a deal RSPs can sell to everyone so the takeup during rollout is maximised.
gnome
2
You think that NBN should offer no price and speed graduations, or more price and speed graduations?
Which, on the well known three bears principle, suggests that NBN Co has probably got it just right. Not that some people are ever likely to admit it!
xvart
3
Typical telstra wank, why should we be paying more for high speed, I pay less now than I did 10 years ago for more speed and data, and I paid less 10 years ago than I did before then. My computer is faster for the same money as 10 years ago so I should always pay more for faster and better, perhaps why I don't do telstra internet plans.
Sammy
4
Bullshit.
No one wants to be using the net, downloading stuff, and constantly be having "I wonder what this is costing me" running through their heads. Telstra are a dirty money-grubbing ripoff merchant company and they know thw NBN is going to make them irrelevant.
Damien
5
I just got back from Canada. While I was there I had access to relatively cheap, FAST cable internet. $60 a month for a 200gig limit at 25mbps (I had the first 6 months at $30 on a special offer). While on the phone setting it up I had an interesting conversation with the person on the other end about how woeful Australia's internet is. This wasn't anything new and she had heard the same thing many, many times.
I'm now back living in Melbourne. I live only 24 kms from the very centre of the city - Bourke St to be exact - and I've been told I live "too far away from a metropolitan area to have cable". So instead I'm stuck on ADSL2+ which is lucky to hit 500kbps (on a crazy good day) and which drops out multiple times a day. I pay $75 for the "privilege" of 120gig of download.
We are an international joke with terrible infrastructure and short-sighted companies with their hands in the money jar and their heads too far up their own backsides. Bring on the NBN, make it fast, make it reasonable download limits, and make it affordable. And hurry up about it.
Morley.
6
+ 1. Bravo Damien.
Phil
7
NBN, why doesn't anybody mention that 100Mbps is already available for the last year through Telstra cable at about the same cost proposed by NBN.
cable man
8
Only certain cable areas phil , the majority of cable sites are still 30mbps , of which I am lucky to get 20mbps when the service is not congested and peak hour when every one jumps on their computers and pay tv it grinds to a crawl .
Having said that its a million times better than crappy adsl 4+ km from an exchange on 30 year old copper phone lines that many in australia are burdened with . My previous adsl service struggled to crack 5mbps .
So I consider myself lucky but at the end of the day only a small amount of Australia is on the coax cable network and the time is rapidly approaching to replace the bulk of that ageing degraded copper wire that most of the country uses.
The question is : While your down there in the hole , what are you going replace that old copper wire with ?
Make sure you choose well because its going to be very expensive either way and you sure as hell can't afford to dig it all up again in 20 years because you made the wrong choice.
Justin Fox
9
He is gravely wrong. Im furious with him. Telstra is a crap company so what would he know? Sweet FA thats what. I would dish out gold bars for the fastest possible speeds if the NBN fibre reached my semi rural location.
Kieran Cummings
10
This tripe from John de Ridder is laughable. The last senate estimates has shown 44% of users on the NBN are on the top tier. I can't believe so many people are republishing this nonsense.
http://delimiter.com.au/2012/10/18/huge-100mbps-demand-44-of-nbn-users-take-top-speed/
While I do think that abolishing the tiered system is wise, I also think the rationale de Ridder gives is wrong. People will pay more for speed.
NPSF3000
11
"NBNCo is run by a group former enterprise market people who may well have a good understanding of that market, but they have a very poor understanding of consumers. They are making one wrong marketing decision after another. "
It's not NBNco's job to understand consumers - they sell to RSP's not individuals. It's the RSP that needs to understand the consumer - and pass their requirements up to NBNco.
Abel Adamski
12
NPSF3000
Too many people have been misled and deceived into a false belief set, I pity them but will have no sympathy for them, may be time to learn some hard lessons through experience
Paul Krueger
13
"NBN users won't pay for high speeds, economist says"
Why would you post his opinion, when the current statistics show that people are paying more for high speeds, in numbers far higher then projected?
This is like posting an opinion that the world is flat, when the evidence shows it to be a sphere.
Johnny Boy
14
"...de Ridder suggested a better pricing structure would be to charge users on the amount of data they use on the NBN, just like gas and water is priced."
Because bits are also a finite resource, right? Or is it because he sees the Australian public as a resource?
Mr Conboy
15
What would be the sewerage charge for being connected to the NBN. Most of the cost of my water bill is the sewerage connection. Crazy comparison. Have Time of day pricing like electricity smart meters.because we will be using too many bits at peak demand. Hopefully Australia don't run out of bits, they are an expensive resource.
michael harker
16
telstra will love this it'll be $200 for 100gb a month when you can download at 10mbps or faster you'll blow that 100Gb in 10 minutes. how about unlimited you know that data thats not on peak or off peak with no cap. or does telstra think unlimited means 10GB then capped still at fucking dial up speeds
Francis Young
17
So, John de Ridder says people won't pay for higher speeds?
But 86% of NBN fibre customers already ARE PAYING for higher speeds. Facts speak louder than economists.