NBN users won't pay for high speeds, economist says

John de Ridder has suggested a better pricing structure would be to charge users on the amount of data they download on the NBN, just like gas and water is priced

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 <i>PM</i> 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.

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU

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Tags ovumnbn coNational Broadband Network (NBN)david kennedyMike QuigleyJohn de Ridder

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