As we head into what many believe to be the start of a connectivity-driven fourth industrial revolution, one could argue there’s never been a more important time for the telecommunications industry globally. The success of our telecommunications networks in Australia over the next decade will significantly influence the success of our economy and our nation.
We have all become incredibly dependent on our devices and networks. Telecommunications is fast becoming the single most important infrastructure in the country.
That is why it’s so important we have the right national policy and regulatory framework in place for Australia’s telecommunications networks. Making sure we have nbn wholesale pricing that is sustainable for the industry, drives take up and is affordable for consumers and businesses is a key part of this.
A recent study of global wholesale broadband networks shows that Australia’s nbn prices are amongst the highest in the world. The study, conducted by Link Economics and commissioned by Telstra as part of our submission lodged today to the NBN Price Review, found that Australia has the second most expensive wholesale broadband pricing in the world for 50Mbit and 100Mbit services.
The NBN Price Review comes at a time when the industry is starting to move its thinking from the build phase to the more business as usual operation of the network. As we do we should be working toward an outcome that better meets the Commonwealth’s nbn Statement of Expectations of improved accessibility and affordability of broadband.
Under the current nbn pricing these objectives, along with the overall sustainability of the industry, are increasingly at risk. Wholesale broadband prices have more than doubled under the nbn and are set to go even higher. The consequence of this is that it is unprofitable for retail service providers to resell nbn at the current retail prices.
An industry where wholesale prices result in zero margins for the downstream retail providers is unsustainable. It will result in higher retail prices, reduced competition and retail providers looking for ways to bypass the nbn altogether – which is bad for customers and bad for the industry. This ultimately means fewer customers will connect to the nbn and an increasing number of customers will switch away – undermining the potential social and economic benefits the investment in the network was designed to deliver.
To avoid these outcomes we are recommending some fundamental changes to
the nbn pricing framework:
- Removal of the separate volume-based pricing charge (CVC).
- Simpler single-point pricing for the standard nbn speed tiers (50/20 and 100/40) with prices reduced by around $20.
- Lowering of the price for superfast services (250 Mbit and up) to under $100.
- Introduction of a $10 per month voice-only service.
- Introduction of a wholesale price discount for targeted vulnerable and low-income customers in need.
Under the current pricing, the predicted growth in data use of Australian homes and businesses will significantly increase the effective per customer price over the next three years. By the end of the nbn migration period, we expect the effective wholesale price for 50Mbit bundles to be $52-$55, and the effective price for 100Mbit bundles to reach $73-$75. At those prices, once you add sustainable margins, the risk is that retail prices will increase to a point they become unaffordable for some customers.
A $20 per month reduction of the standard plans so the all-inclusive wholesale price is $35 for a 50/20 plan and $50 for a 100/40 plan would bring nbn’s pricing closer to international benchmarks, and provide greater incentives for retail providers to compete in and grow the market for fixed broadband in Australia.
The lowering of prices of superfast
services (e.g. 250Mbit, 500Mbit and 1Gbit) to under $100 would make buying these
services more realistic for consumers that need the higher speeds, and enable
retailers to more effectively market and communicate the benefits of these
higher speed services to mass-market consumers.
We’re also calling for a voice-only product at $10 per month, replacing the existing 12/1 entry-level plan. We will also look to work with nbn co and consumer groups to establish a targeted discounted broadband offer. Our customers are telling us that this is what they need and it would particularly address the needs of vulnerable and low-income customers, including aged pensioners.
Collectively, we believe these changes will optimise the social and economic returns of the investment in the nbn, benefit broadband customers through keeping the prices affordable, and address the challenges facing the industry as we transition to the longer-term operation of the nbn.