NBN Co admits broadband is too expensive

NBN Co is staunchly resisting pressure to introduce a cut-price entry-level broadband product because it fears it would cause a flood of users downgrading to a lower tier service, in turn cannibalising its long-term revenue and cash flows:

NBN chief customer officer for residential Brad Whitcomb said introducing a new entry-level plan, which the government defines as a basic 12/1Mbps service with unlimited data for $60 a month, would hinder the company’s multi-year effort to step users up to higher speed services.

“It would tend to drive more customers down into that much lower speed tier,” he said in senate estimates hearing.

“To the extent that the entry level price gets pulled down and the economics become more attractive to retailers, more people would tend to find themselves there…

NBN Co chief executive Stephen Rue defended the current pricing structure, echoing the sentiment regarding the long-term future of the service.

“We set what we thought was a fair pricing outcome with the industry following many, many months of consultation, and a disturbance of that would have a detrimental impact – I think – on consumers long-term,” he said.

NBN Co is effectively caught between a rock and a hard place. If it doesn’t offer an entry-level service, then it risks losing market share to 5G as it rolls-out across Australia.

The drift to competing services could mean that NBN Co is unable to meet its subscription and revenue targets, thereby driving an even bigger writedown for the federal budget.

In my view, the federal government might as well take the Budget hit now – which seems inevitable anyway – and writedown the value of the NBN. This would allow NBN Co to lower its access charges on higher-speed packages, as well as expand broadband access across the community.

At the same time, the NBN should be opened to competition in capital city areas where it is not a natural monopoly.

Ultimately, low cost and reliable internet is an essential service, just like water, electricity and gas. Therefore, it makes no sense for Australians to be charged some of the highest user fees in the world, in the process lowering Australia’s productivity.

Unconventional Economist
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  1. You make a sound economic argument.
    The NBN is going to be like a leech attached to jugular of the Australian economy for the next ten years, sucking growth out of it, and preventing first world services from reaching us.

    In ten years time most of the world will have access to 1200Mb/s broadband and 100Mb/s wireless. We’ll still be stuck with NBN at 25-50MB/s

    • PlasterMEMBER

      Gosh that sounds like Telstra, back in the glory days.
      It fought tooth & nail to keep the technology at the lowest possible ebb to reduce capital expenditure and maximise the return from existing obsolete equipment – that in turn was purchased with this Luddite philosphy in mind.

    • ‘going to be’? It already is. The money’s been spent – just write the entire thing off and admit it’s been a disaster.

      A bit of honesty from the gubbermint would be a shock, I know, but a breath of fresh air would be quite welcome right now.

  2. I sense a disturbance in the force.

    Have we built a $70,000,000,000 somethingorother just to provide down speeds comparable to ADSL1 (8mbit)? And slower than 3G mobile?


    • If they’d just appointed Tweedle-dum and Tweedle-dee to oversee the project we might rank above Madagascar for internet speeds right now, but no ..

    • drsmithyMEMBER

      Have we built a $70,000,000,000 somethingorother just to provide down speeds comparable to ADSL1 (8mbit)? And slower than 3G mobile?

      Yep. And goddamn, didn’t the people responsible work hard to bring you yesterday, tomorrow.

    • 720p will do well on adsl.
      if fibre at adsl speed costs the same, there will be customers.
      5G thingo… pipe dream. It cannot replave a physical connection. It will be great for mobile internet but with the mobile internet flaws in mind. Much faster but less stable version of 4G.

      • I was joking.

        We were able to watch Netflix without lagging though not HD with a 5/0.5 ADSL.

        Not that I want a 12/1 but I can see that some will.

  3. We should have saved the billions and instead spent it on upgrading the audio systems in our new French subs.

  4. Heck, even my 4G wireless internet is a NBN-killer… and it only costs me a FRACTION of what an NBN connection would LOL. what a waste!

  5. It is sadly representative of how rooted Australia is when the key reason why have spent $70 billion to get overpriced crappy broadband is because of its accounting treatment.

    • I wonder what would’ve happened if the government spent $70b to develop cheap gas for domestic “market” and perhaps some significant scale solar/wind….

  6. StephenMEMBER

    This is the dumbest thing ever… It literally costs them the exact same price to deliver 12/1 as it does to deliver 50/20… It’s their stupid pricing model that is the problem!

    Hell, in the FTTP part of the rollout, it costs NBN Co the exact same OPEX to deliver 1Gbps… Literally all the hardware is there, they could enable a plan to anybody who has fibre to their house in a few minutes through their system. But (again, because of the stupid pricing model) they’ve arbitrarily made anything over 100Mbps unaffordable for no reason!

    • BoomToBustMEMBER

      Not 100% true, it depends the capacity of the backhaul and the capacity of the line into the premise. With HFC they have been installing significant fiber into areas and dividing the network into smaller chunks attached to this fiber. Once they finish migrating everyone everyone to HFC NBN they will have much more bandwidth (frequencies to play with). FTTP – backhaul only is the issue and will depend on what contention ratio you are paying for. FTTC (SHDSL) – much of the copper is still garbage and cannot run at desired speeds. Wifi – limited by spectrum availability, efficiency of the spectrum (4G vs 5G) and backhaul into the towers.

  7. Funny seeing the same MB NBN pumpers have to change their tune now the predictable has happened.
    I have a $75/month NBN FTTB plan and the VDSL2 speed is fine, but question is at what cost. My 4Gx phone gets 80Mbps no problems, starting to question the necessity of the fixed line, at least at current prices. $50 a month would be more reasonable.

  8. BoomToBustMEMBER

    At one site we are about to install TPG fibre optic 1000/1000mb connection for $88 IC-GST/month over 36 months (+$2200 INC-GST up front build fee as we chose 36 months rather than 48 month contract), this includes civil works to install the fiber into the building and 1:1 contention. Currently we have a 300/300 Fiber from Telstra for $2380 INC-GST/month with $6K build fee over 36 months. Basically 3x faster for 1/3 the price for the same product from a vendor other than Telstra or Telstra type monopoly. If this translated out the same for NBN we would be looking at 100mbps/$88/month or cheaper based on less than 1:1 contention ratio of back haul capacity, especially in residential or dense areas.

    The other thing that has been killing me for the last few years is NBN being deployed to residential areas first when businesses have been crying out for and require better speeds to do better business and are stuck or $h1tty ADSL or EFM (3/3) connections. Once better, cheaper and reliable options become available NBN will be gutted. This is especially true for transient residential population (renters etc) as it will not require contracts, termination fees, installation fees etc. Just take your box with you, plug it in and you are working again.

  9. 5G isn’t going to be the NBN killer people think. It is line of sight only, so great for sports events, useless for internet at home.