Ergas advisor now NBN pricing chief

Ergas advisor now NBN pricing chief

Summary: The National Broadband Network Company has hired as its general manager of pricing an analyst who contributed to a report claiming the company would need to charge retail prices of $215 per month to achieve commercial returns.

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The National Broadband Network Company has hired as its general manager of pricing an analyst who contributed to a report claiming the company would need to charge retail prices of $215 per month to achieve commercial returns.

Dieter Schadt, one of the pricing architects who had contributed to a report commissioned by industry telecoms newsletter Communications Day was hired by NBN Co in November last year as its general manager of pricing, according to his LinkedIn profile. The report was published by Henry Ergas' controversial firm Concept Economics, which has since gone bust.

The costing exercise, which Schadt had a hand in, looked at the likely retail prices necessary for the NBN Co to provide an acceptable return on its investment of up to $43 billion. Concept Economics estimated at a 90 per cent take up of the NBN Co, its retail prices would need to be $215 per month to pay standard capital returns. At 40 per cent it would need to charge $380 per month.

Concept Economics' credibility was buttressed by its past as a provider of pricing analysis to Telstra. Schadt also came to Concept Economics with deep knowledge of likely NBN Co pricing, having been a Telstra director of wholesale pricing between 2002 and 2005.

The Concept Economic study also estimated that the real cost of the NBN, if it accounted for operating costs over its eight-year construction phase, would rise to between $60-70 billion, a good $20 billion over the current estimate of $43 billion.

Schadt was joined by another former Telstra pricing architect, Tony Nielson, in December. Nielson, now a senior pricing architect at NBN Co, had held a similar role with Telstra between 2006 and 2008. On LinkedIn he described his role as "developing pricing models for wholesale products to be delivered over NBN's FTTH network".

Topics: NBN, Broadband, Telcos, Telstra

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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9 comments
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  • FTTH?

    It's interesting that the pricing people at NBN Co don't even understand what they are about to undertake. I have been of the belief that NBN Co was installing a FTTP network, not a FTTH network. If they can't get this right, how can they get the pricing right?
    anonymous
  • FTTH = FTTP

    Errr... FTTH and FTTP is the same thing (H= Home, P= Premise)

    I find it funny how people who have lots to lose in this internet world will always over price the NBN to make it look bad.
    Yet businesses from other countries who have deployed FTTH/P will say they could do it for alot less.
    anonymous
  • hmmm....

    After reading some of the articles being posted of late about the NBN, I'm starting to wonder if there aren't some employees at NBNCo who are ensuring that the network is "built-to-fail" as far as providing real competition in the market is concerned - especially since buiiding it as a layer-two network will mean that providers who wish to sell over the network will need to install their own switching equipment to provide those services (a cost that very few bar the largest telcos - ie telstra et al - will be able to afford)...

    I can't help but think some decisions are being made by NBNCo which are aimed at ensuring that competition is stifled right from the start, and that *REALLY* worries me.
    anonymous
  • Top Heavy?

    I'm not really surprised at these costs due to how much the company is top heavy already 200 of that cost prolly goes to paying there salaries.

    And i'm not sure if using ex telstra employees to analyse the cost as telstra as always been overpriced compared to other companies. The pricing managers are way out of touch.
    anonymous
  • Pricing for Telstra

    I think his previous positions say it all. How overpriced has Telstra been for the last decade? And part of that is this guys doing. So, do we really need someone who helped Telstra rake in above average returns for below average service determining pricing for us?
    anonymous
  • Commercial Returns

    Why are they pushing for commercial returns on it. we will already pay for it through the taxes needed to build it. so they want us to pay for it again?
    The entire reason that it would be done by the government is not for commercial returns, but for improving the infrastructure to promote a better backing for businesses. which in turn produces revenue through taxes.
    If they want commercial returns it should be handled privately.
    anonymous
  • FTTH & FTTP

    They are not the same thing. This will be a network for home, business and government. If you venture back to the original announcement, FTTP was chosen wisely so that it was not seen as a HOME only network, as FTTH implies. All along the NBN Co press releases have used the chosen "FTTP" model, until now or are these price gurus going to adapt one price model for home use and another for business?
    anonymous
  • @FTTH & FTTP

    As I understand it, FTTP and FTTH are technically different.

    To the home being a connection to each and every residence. So in a block of units, each unit gets a connection.

    Whereas to the premise being connection to the street address only. Not necessarily a connection to each of the units at that address.

    I may be incorrect here and if so I will certainly stand corrected, as I am no expert on such detail. But if this is the case FTTP would be cheaper than FTTH.

    Read the government's first NBN announcement, it clearly read FTTP, not FTTH. It also says -

    Under the Rudd Government's new national broadband network every house, school and business in Australia will "get access" to affordable fast broadband. {END}

    Get access?

    http://www.minister.dbcde.gov.au/media/media_releases/2009/022
    anonymous
  • Because

    that is what Labor are pushing.

    Labor have said it will be commercially successful. Well, they hope it will be. Huge amounts of debt don't pay themselves off, right?

    The 'entire' reason it's being done by the government is because there is not enough incentive to do it, nationwide, for private industry because it won't generate commercial returns...

    Otherwise it would have already been done, right?
    anonymous