NBN Co CEO rejects broadband pricing criticism

Hits back after Telstra pushes for further price cuts

NBN Co CEO Stephen Rue

NBN Co CEO Stephen Rue

Credit: NBN Co

Claims by telcos that NBN Co’s wholesale pricing is creating an “unsustainable industry” are unfounded, the network operator’s chief executive has argued.

In a blog entry that will be published later today, NBN Co CEO Stephen Rue says that the company has cut prices significantly “to help the economics of the nation’s internet and phones companies, while also boosting customer take-up of higher speed plans”.

More than 64 per cent of end users on the NBN have plans with wholesale speeds of 50Mbps or faster, the CEO noted.

“Retailers have seen the benefit of these changes with 80 per cent of new customers taking up these higher speed plans,” Rue writes.

The growth in 50Mbps services in particular followed an NBN Co promotional discount in late 2017; that particular scheme wound up in late 2018, however.

“We understand that companies have an obligation to be profitable, and that requires doing what they can to lower their costs,” the CEO writes. “But among the criticism it’s worth remembering that customers continue to sign up to the nbn, CVC prices continue to fall, and more internet providers continue to enter the market.”

CVC is a key component of NBN Co’s product pricing. Retail service providers (RSPs) pay for both access (AVC) and capacity (CVC), with NBN Co in 2017 announcing it would launch bundled products that have a single charge for access and a portion of capacity.

“In all the industry gnashing about NBN’s pricing model, there is one key point that is always omitted,” Rue argues. “And that’s the fact that NBN exists to serve all Australians, from young apartment-dwelling couples in the heart of the nation’s capital cities, to families living in far-flung regions where their broadband connection is their connection to family, friends, work and education.

“There is no doubt that it costs a lot of money to build a broadband network across a country of this size. We are not simply talking about the upfront capital costs to dig the holes and lay the cables, and connect homes and businesses. There is the ongoing cost of ensuring the network can be maintained, is resilient and secure, and that it keeps up with ever-growing data demands.”

Rue’s piece follows a new wave of complaints from telcos about NBN Co charges in response to a review of wholesale pricing the company has been conducting.

Telstra yesterday released an excerpt from its submission to the review, with Australia’s biggest RSP calling for NBN Co to simplify its pricing scheme by ditching a separate CVC construct and cutting wholesale charges by around $20 a service. Growing household data usage will increase CVC consumption and lead to higher broadband pricing, Telstra argued.

Rue’s piece notes that as part of NBN Co’s agreements with Telstra, it leases access to a range of the company’s infrastructure, such as ducts and pits, and pays fees as customers migrate away from the copper network on to the NBN. NBN Co has paid Telstra around $2 billion this year, the NBN Co CEO writes.

“Our Corporate Plan points to a continuing payment to Telstra for access to ducts, dark fibre and facilities of $1 Billion annually from FY21, representing 20% of forecast revenues, and continuing for decades after the build is completed,” Rue adds. “This has an obvious impact on wholesale prices.”

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Tags broadbandNetworkingTelecommunicationsNational Broadband Network (NBN)

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