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Australian Telcos Demand Cuts in 'Unsustainable' NBN Prices

Robert Clark
News Analysis
Robert Clark
8/19/2019

The finish line might be in sight, but Australia's NBN is at the center of a controversy once again over the pricing, performance and viability of the A$50 billion ($34 billion) scheme.

Retail broadband players including Telstra have complained that its prices are too high, while a key government agency has warned that the state-owned company's financial objectives may not allow it to meet its network performance targets.

NBN Co, set up ten years ago to build a nationwide wholesale broadband network, has just announced its first full-year EBITDA profit of A$608 million ($412 million) on the back of a 43% rise in revenue.

It says it has completed 85% of the buildout and will be finished by mid-2020.

But its biggest retail customers say its pricing is unsustainably expensive.

Telstra CEO Andy Penn fired the opening salvo on the company blog last month, arguing Australia had the world's second most costly wholesale broadband rates for 50Mbit/s and 100Mbit/s services.

He called for NBN to end its usage-based pricing and to cut wholesale prices by A$20 a month for standard 50Mbit/s and 100Mbit/s plans.

"Wholesale broadband prices have more than doubled under the NBN and are set to go even higher," Penn wrote. "The consequence of this is that it is unprofitable for retail service providers to resell NBN at the current retail prices."

Vodafone Australia CEO Matthew Lobb has also called the pricing structure unsustainable and warns that it is driving retail players into reselling broadband over 4G and 5G networks.


For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.


NBN Co has rejected the call to scrap its volume-based charging -- known as the CVC -- on grounds that it would be "somewhat complex" to restructure its pricing models which are embedded in the IT systems of NBN Co and all of its retail clients.

It also argues that it is good economics because as customers consume more NBN resources it drives cost back to NBN Co and encourages it to invest more.

But analyst Paul Budde says the NBN costs "far too much" for the level of service it delivers.

Australia ranks 60th in the latest Speedtest Global Index, sitting between Brazil and St Vincent & the Grenadines with an average download speed of 40.4 Mbit/s.

"It looks like the way they think is 'let's start with a really crappy service so people will be forced to spend more for a real broadband service,'" Budde said. "The problem is that the low entry service is already expensive in comparison to international products based on what you get for it."

Meanwhile, national infrastructure body Infrastructure Australia has pointed out that, with the network buildout nearly complete, discussions on NBN Co's future would soon start, and that would mean a focus on its profitability.

In its annual review issued last week, the agency warned of the "inherent tension" between the NBN's strategic goals and NBN Co's need to deliver a return on its taxpayer-funded investment.

"If all goals cannot be achieved, the ability for Australians to access affordable and high-quality NBN services may be negatively affected."

— Robert Clark, contributing editor, special to Light Reading

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