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The Australian Competition and Consumer Commission (ACCC) apprised that internet rates could double in a decade if NBN Co’s newly proposed pricing model moves forward.
The model pertains to the NBN Co’s sought amendments to the Special Access Undertaking (SAU), which governs how internet providers can access and sell NBN services to home and corporate clients.
The proposed revisions include changes to the present NBN Co pricing mechanism, which, if implemented, could result in annual increases in NBN access costs.
According to ACCC estimates, the 50Mbps plan will cost the same as the 100Mbps plan by 2027, and the 25Mbps plan will cost the same by 2034, while its cheapest internet rates will double in price or more by 2040.
Only about 20% of active NBN users would benefit from flat pricing; the vast majority would be stuck with the current pricing scheme, which means they would face frequent price hikes as their internet usage increased.
If internet rates for the three tiers converge at – or ahead of – the pace predicted by the ACCC, consumers may be forced to pay for 100Mbps services whether they need them or not, and even if their lines are capable of supporting these speeds.
The ACCC observed that within a few years, the costs of the 50Mbps product will match those of the 100Mbps product, and similarly for the 25Mbps product before the conclusion of the SAU term [2040].
Australia’s Big Three, unsurprisingly displeased
Australia’s three largest telecoms have reacted angrily to NBN Co’s planned reforms, advocating for a strategy that prioritizes customers and keeps broadband affordable to all families.
Optus Vice President of Regulatory and Public Affairs Andrew Sheridan claimed that the SAU amendments would “hit everyone’s hip pocket” and urged the new Labor Government to intervene.
“Retail providers like Optus will have no choice but to pass proposed cost increases onto our customers, knowing that many are already feeling the pain of rising household costs,” Sheridan said.
Similarly, a Telstra spokesperson said that NBN Co’s SAU “failed to deliver” on what was required to ensure Australia’s digital future, and that the government should get involved.
The spokesperson said wholesale prices are already among the highest globally and will only worsen under the proposal, driving more people to wireless broadband products.
Meanwhile, a TPG spokesperson said that the idea is a “slap in the face for those who rely on affordable broadband to stay connected for work, study and play,” according to a TPG representative.
According to the spokesperson, “The only thing clear from NBN’s convoluted pricing model is that internet services are going to get more expensive for Australians in the future.”
“The NBN’s pricing proposal can be summed up as price hikes and no improvements.”
NBN’s 100Mbps standard and its cost-efficiency issues
NBN Co reinforced in a supporting submission to the ACCC that It’s utilizing the new pricing model to see how much customers are willing to pay for 100Mbps services.
NBN Co’s network operator claimed that the 100Mbps plan would best support the broadband experience of about 50% of end-users based on predicted usage throughout this decade, according to NBN’s modeling of anticipated usage requirements.
It also said that NBN Co’s prices levels are expected to grow as the willingness to pay for the higher internet rates increases going forward.
However, the ACCC said there was some doubt about whether most households needed 100Mbps speeds to the level NBN Co wanted to sell them, citing data from the government-run Bureau of Communications and Arts Research.
According to the modeling by the Bureau, the typical household speed demand by 2028 will be 29Mbps, with 99.9% of households requiring no more than 78Mbps.
One primary concern for the industry is whether NBN Co incurs its costs efficiently and to what degree these expenditures are being exploited to raise pricing continually.
The ACCC claimed no link between underlying costs and the price structure, price levels, or expected price pathways under NBN Co’s proposal.
The commission further said that NBN Co’s proposed pricing and proposed price paths do not appear to “contain any direct link to current or future demand.” but rather, NBN Co’s proposed pricing appears to derive largely from an escalation of its existing pricing practices.”
NBN Co has also suggested an initial pricing hike on NBN 25 services in exchange for faster upload speeds (10Mbps, up from 5Mbps).
The current NBN 12 entry-level package will remain accessible to retailers, with a new voice-only option on a proposed monthly rate of $12 per month.
The ACCC claimed that the drive for the proposal is the “significant losses” incurred by NBN Co since the network’s construction began in 2009 – $38 billion in absolute terms or $44.5 billion in nominal terms.
The ACCC is consulting on NBN Co’s revised SAU until July 8, while it plans to deliver a draft decision on whether to approve the pricing adjustments in September 2022.
NBN Co’s chief executive Stephen Rue indicated in Senate estimates immediately before the election that determining the ultimate cost will take six to nine months.
Jaw de Guzman is the content producer for Comms Room, a knowledge platform and website aimed at assisting the communications industry and its professionals.
