NBN flags potential price increase

The company is attempting to lift its average revenue per user, but Telstra says the changes are ‘not sustainable.’

NBN executives Katherine Dyer, Philip Knox and Stephen Rue. Britta Campion / The Australian

NBN Co has flagged potential wholesale pricing changes that would increase the cost of its high-speed plans by $2 per month, as the company seeks to bolster its average revenue per user (ARPU), which was flat in its most recent results.

The company behind the high-speed broadband network on Monday released a new consultation paper ahead of a months-long consultation process, with an interim paper to be delivered in the middle of 2020, though the company has delayed any substantive changes to the 2024 financial year.

Telstra has criticised the move, declaring NBN “pushed the hard decisions down the road”.

Significantly NBN has resisted pressure from users to slash the controversial CVC charges which determines broadband capacity for retailers.

NBN Co is specifically seeking feedback on two options, one that would freeze access charges at May 2021 levels and increase capacity inclusions by between 0.10 Mbps to 0.50 Mbps in May 2022 at no extra cost to retailers.

Option two involves NBN increasing its access charge by $2 for plans over 50Mbps, but providing up to an additional $2.80 worth of CVC inclusions over and above the inclusions proposed in Option 1, which chief customer officer Brad Whitcomb said represents effectively a 17 per cent to 29 per cent discount for the additional CVC inclusions.

If NBN increased its charges by $2 per month, retailers would either have to wear the cost themselves or pass it on to consumers.

“We believe both options deliver the industry real choice in managing future data demand,” Mr Whitcomb said.

“Consulting with the industry on our wholesale pricing has long been an important part of how we’ve been running our business, it’s the way we seek to create balance between increasing customer experience, creating a level playing field for retailers, and then also ensuring that we generate enough revenue to maintain and upgrade our network over time.

NBN Co chief customer officer Brad Whitcomb. Source: Supplied.

“And while this consultative approach often does require some trade offs, we believe it‘s led to some significant benefits for customers over time. Across the critical dimensions of speed, performance and value, we’ve made great progress, and we’re really looking to build on that progress through this consultation.

“We’re proposing yet another increase in value within the existing pricing construct, but we’re also open to changing and evolving our pricing model, provided that it allows us to keep the network vibrant, and provided that it promotes the best possible outcome for our customers. So we’re really looking forward to the next weeks and months of consulting with industry to lay the foundation.”

A Telstra spokesman criticised the timing of the proposed changes and said they don’t go far enough.

“Retail providers are aligned in the view that for the industry to be sustainable, and to be able to support the government’s vision for Australia to be a leading digital economy, there needs to be significant changes made to NBN wholesale pricing,” the spokesman said.

“With the NBN rollout complete, and data growth surging on the back of COVID-19, now is the time to act. We have just received the proposal, but on first review it does not appear to offer any real change and pushed the hard decisions down the road.

“It’s a simple equation: NBN revenue per residential user will continue to increase substantially over time, so without change consumers will end up paying more for home broadband and/or the level of service they get will drop. That’s not something anyone wants to see.

“We will continue to work with NBN Co and the rest of industry on a pricing structure that is sustainable for all industry players. If NBN wholesale prices continue to rise in the second half of the decade, which is what will happen under the current structure, wholesale prices will be higher than current retail prices. That’s obviously not sustainable and something has to give.”

Mr Whitcomb pointed to statistics from Accenture which found retail telecommunications prices have fallen markedly in the past 20 years.

“Since 2016, the cost we charge retailers per gigabit has dropped from 33c to just 15c per gig. While the cost of virtually every other utility has gone up, our wholesale charge per gigabit is already less than half of what it was just five years ago – and we expect this trend to continue,” he said.