NBN no cash cow for providers

Big targets, small profits: BBY

The National Broadband Network (NBN) will not be a cash cow for Internet Service Providers, according to a BBY financial analyst.

In the wake of the NBN Implementation Study's release, which suggests access prices for the optical fibre network double that of the existing ADSL network, BBY's Mark McDonnell said ISPs could lose profits.

The $25 million study released yesterday, recommended charging $30 to $35 a month for wholesale access to a voice and 20Mbps data service, and $25-$30 for data alone. Retail prices for those services could lie between $50 to $60 a month, according to industry analysts.

McDonnell said the NBN was risky for ISPs because it relies on consumers buying a more pricey 100Mbps services.

“It is not profitable for providers at the $30 [access prices],” McDonnell said.

“It is only towards the [100Mbps] access prices that it becomes profitable, but uptake at that end could be very small.

"How does that greatly enhance profit? The price points are not competitive and in line with industry dynamics,” he said.

The study claimed the 100Mbps service will suffer slow uptake, prompting Federal Communications Minister, Stephen Conroy, to labelled the findings “very conservative”, while speaking to ABC NewsRadio. The report expects consumer prices to stay low because of the financial advantages that the optical fibre has over copper in terms of operating and set-up costs and expected churn.

"Over time, end users will attribute greater value to fibre capabilities, particularly as rich services continue to become more prevalent," the report reads.

McDonnell said providers pay about $16 for access to the copper network, and estimates they will charge $80 to $100 for 100Mbps NBN retail services.

He said the NBN is reliant on “total buy-in” from Internet providers such as Optus, iiNet and Internode to achieve the 80 per cent penetration rate cited in the study. He said that requirement is greater if it does not attain support from Telstra.

Further, he poured cold water on claims in the report that mobile networks will not present a danger to the NBN, and said consumers may shun the NBN for mobile alternatives.

“Optus, Telstra and Vodafone all have their own mobile networks that of course will compete with the NBN,” McDonnell said.

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Tags NBNNational Broadband Network (NBN)NBN Implementation StudyMark McDonnellBBY

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