Telcos baulk at passing lower NBN prices on to customers

NBN Co has announced structural changes that should make internet services cheaper, but don’t hold your breath for a discount.

Consumers remain at the mercy of telcos to see if a reduction in the prices charged to access the national broadband network are passed on.

NBN Co announced yesterday it would lower the cost of some wholesale bundles and increase capacity for telcos after five months of consulting with the industry. It said: “Australians stand to enjoy more affordable access to high-speed broadband if retail service providers (RSPs) pass on the benefits.”

That appears to be a sizeable “if”.

Telcos have long complained about the high price of NBN access cutting into their profits and have been calling for prices to drop.

Their customers have been calling for the same thing as we deal with overpriced, poor internet that has made the service the most complained about to the Telecommunications Industry Ombudsman, overtaking complaints about mobile services for the first time earlier this year.

While the changes to capacity allocations that allow telcos to spread congestion over the whole network should at least improve service reliability, at this stage it doesn’t look like the services are about to get any cheaper, which is bad news for NBN Co as they seek to get more Australians, particularly those on lower incomes, to join the network.

The wires and ports behind the national broadband network are a fitting visual metaphor for the complexities of its pricing structures.

Several of the biggest telcos were asked by news.com.au whether they would be passing on the price reductions to their customers, but all of them (the ones that responded at least) avoided giving a straight answer to that specific question.

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The Australian Communications Consumer Action Network (ACCAN) said it would be keeping an eye on the telcos.

“We will be monitoring the market to ensure these improvements are passed on to consumers once they come into play over the next 12 months so NBN users get the full benefit,” ACCAN policy director Una Lawrence said.

“While there is still more to be done, NBN Co’s latest changes to their pricing and inclusions are a step in the right direction and demonstrates that the organisation recognises the important role that broadband plays in our everyday lives.”

ACCAN isn’t entirely satisfied with the changes and have called on the NBN to develop concessions for higher speed levels than just the entry level 12mbps bundle.

“(We have) long highlighted the barrier of broadband affordability for low-income households. However, we know the 12/1mbps service won’t meet the needs of many low income households, especially families, and urge NBN Co to develop a more suitable concessional higher speed service as a priority,” Ms Lawrence added.

She said the increased take-up of the lowest speed tier showed consumers wanted to connect to the NBN but price was proving to be a barrier for many.

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Of the telcos who spoke to news.com.au, Telstra was the most vocal in saying NBN has more work to do in simplifying prices.

A company spokesperson repeated calls made by Telstra CEO Andy Penn earlier this year to do away with the capacity charges (known as connectivity virtual circuit or CVC charges) telcos pay to decrease network congestion. They are charged on top of the network access costs, are variable and can increase significantly when more of us are streaming, gaming and browsing the web.

Telstra chief Andy Penn during an address at the National Press Club in Canberra. Picture: Gary Ramage

“Telstra maintains the first-best approach to pricing is for NBN to move away from CVC charging and implement a simple, one-part price structure based on speed tiers,” a Telstra spokesperson said.

“The objectives of NBN pricing should be to deliver simple, affordable high-speed broadband services while promoting accessibility for vulnerable and voice-only customers. While some of the changes are positive, the overall suite of proposals does not come close to meeting these objectives and adds additional complexity and potential confusion for customers.”

Telstra also expressed concern that there’d been “no change to the price of the most popular 50mbps plan”, which the company said was “the optimal entry-level speed for most customers”.

This is despite Telstra’s “entry-level” offering being on the 25mbps speed tier, which will soon be $8 cheaper for the telco to purchase access to, albeit with less capacity that the company will have to pay additional CVC charges to offset.

NBN Co said even with the lower capacity, telcos would still be saving money, and the most popular 50mbps bundle would be modified to include greater capacity without a price increase.

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Telstra also repeated its calls for an affordable voice-only wholesale product to be introduced to meet the needs of older Australians who want to retain a home telephone but see no need to connect to the internet.

NBN Co also announced it would introduce a new high-speed tier with the maximum download speed available to consumers on the network but with slower upload speeds.

The new bundle would offer 100mbps download speeds and 20mbps upload speeds for $58 a month, a $7 saving over the current 100/40mbps speed bundle.

Telstra said the new high-speed bundle was unnecessary and would confuse customers.

The company said NBN Co should just drop the price of the existing 100/40mbps bundle to $58 rather than creating an additional product. NBN Co said it would offer the 100/40mbps bundle at that price from January until May when the new 100/20mbps bundle would be introduced.

Telstra said NBN Co “need to move away from temporary discounts and offers to lowering actual price” but wouldn’t say whether it would pass on lower prices to customers if they were implemented.

An NBN Co contractor installing infrastructure at Newcastle.

Optus vice-president of regulatory and public affairs Andrew Sheridan welcomed the changes and said the capacity changes would help the telco “deliver an even better customer experience”.

Optus recently overtook TPG to be crowned the fastest provider of NBN services.

But Mr Sheridan wouldn’t say if Optus would pass on discounts to their customers, and if anything, it looks like it might actually put the prices up.

“As consumption of data continues to grow, we expect that further price changes will be required to maintain service performance and meet customer expectations,” Mr Sheridan said.

TPG and iinet did not respond to news.com.au’s request for comment.

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Upstart telco Aussie Broadband, however, gave a glowing review of the announced changes.

The company’s managing director Phil Britt said NBN Co had listened to the industry’s concerns.

“We believe the announcement from NBN is good news for many consumers, specifically relating to higher speed plans and bandwidth provision,” Mr Britt said.

Despite Telstra’s claim the new high-speed bundle would confuse customers and telcos, Mr Britt welcomed its introduction and said “we will probably see prices drop for this speed tier in the coming months” as a result.

He also said Aussie Broadband was pleased it and other telcos would now be able to pool its CVC bandwidth on a national scale to increase service reliability. Previously telcos were only able to pool capacity within the confines of its service areas, which were determined by the 121 “points of interconnect” (POI) within telephone exchanges around the country where RSPs connected to the NBN network.

NBN Co said the uptake of the lowest-priced 12/1mbps bundle had more than doubled since it was modified at the start of last month.

Mr Britt said his company would like to see further changes.

“We would like to see more work done on affordable plans for price-sensitive customers, but we recognise that will probably require a political mandate,” he said.

Do you think telcos should pass on the discounts to their customers to make accessing the NBN more affordable? Let us know in the comments below.