NBN study prices cheap, slow broadband

NBN study prices cheap, slow broadband

Summary: If Greens Senator Scott Ludlam wins his fight to have the government table the NBN Implementation Study, what will he find?

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analysis If Greens Senator Scott Ludlam wins his fight to have the government table the National Broadband Network (NBN) implementation study, what will he find?

If Minister for Communications Stephen Conroy is true to his word, it will contain the gory details of how to get the lowest paying broadband customers onto fibre.

In April last year, shortly after the announcement that the government would go it alone on the NBN, Conroy laid out fairly clearly what would be in the study.

"No consumer or business will be forced to pay anything for services on the NBN," said Conroy. "But clearly affordability is an important factor to drive take-up. NBN prices cannot be structured without having careful regard to the prices people pay today for comparable services... The implementation study will give careful regard to pricing levels on the National Broadband Network."

In other words, the study will try to define a wholesale price that will enable retail service providers to offer packages that are cheap enough to lure the very bottom of Australia's broadband user base to the new deal.

What the study could safely assume, as has been borne out by the Australian Communications and Media Authority's recent figures, is that even if higher speeds become available, Australian consumers might not pay extra to take them up. But they will take higher speeds if they become available at the same price as today.

What it will all boil down to is the study's pricing recommendations for slower connections — not 100Mbps but 1 to 8Mbps, where 30 per cent of all internet connections sit. Can it, for example, provide 20Mbps — the current maximum for ADSL2+ — at a lower cost than what internet service providers (ISPs) are currently paying to install their own "DSLAMs" in Telstra's exchanges?

iPrimus' cheapest copper network ADSL2+ is $30 a month on a 3GB download quota, which is provided over Telstra's unbundled local loop at a cost of $16.70 per month in metropolitan areas.

It's not just fixed-line pricing the study will have to take into account when considering how low pricing has to go for the network to be viable, but also the price and speed of wireless broadband. As has become clear in the past two years, wireless broadband is snapping at the heels of fixed line broadband, which also means it is snapping at NBN Co's.

While NBN Co chief Mike Quigley has played down wireless broadband as a threat — because it will never be a pure substitute for fibre — should NBN Co price wholesale access for the bottom of the market a few dollars too high, there is the risk that consumers flock to it, rather than make the switch to fibre.

Also coming into the pricing mix will be the company's roll-out costs, and how quickly it will burn cash. The study will likely consider what roll-out strategy is best in a financial sense, stopping NBN Co from over-committing on capital as it waits for revenues to stream in. Should NBN Co connect whole neighbourhoods as a matter of course, or should it activate lines as households demand it? While doing a whole region might be cheaper overall compared to provisioning on a house-by-house basis, one option has a significant upfront cost, while the other doesn't.

Of course, speaking of costs, the study will also have to address the elephant in the room. It will need to assess pricing under two key scenarios: Telstra's agreement or rejection of the government's advances for it to transfer customers to the NBN Co.

If Telstra agrees to ditch its copper network, and migrates its customers to the NBN Co, as flagged in the heads of agreement announced last year, the problem would largely be solved; if Telstra migrates its customers to the NBN fibre-access network, all ISPs will be forced to migrate.

The worst-case scenario the report can possibly assume is if Telstra doesn't play along with the government and continues to invest in ADSL technology. In that case, NBN Co will face a protracted and bloody battle with the incumbent, as ADSL technology edges towards NBN Co's fibre speeds using infrastructure that is already a sunk cost.

Topics: Telcos, Broadband, Government AU, Optus, Telstra, NBN

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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Talkback

8 comments
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  • One speed only - 100mbs

    Surely the NBN is not going to be like Telstra and have artificial speed limits. Remember Telstra's 64kbs, 512kbs when ADSL reliably can give 1500 kbs.
    You are actually adding more costs when you introduce different speeds on the same network.
    Everyone should have 100mbs up and down and then different prices depending on download limits or services.
    anonymous
  • HEAR HEAR!

    HEAR HEAR! That's exactly right. Why build a ten lane freeway and only allow Datsun 1200s to be driven on it. I hope Senator CONroy is watching this because the market is speaking to him RIGHT NOW.

    I want the full 100Mbs but am happy to remain on my paltry 15GB a month, much of which I don't use anyway.
    anonymous
  • Don't compare ADSL2+ 20Mbps

    It's no good trying to compare ADSL2+ at 20Mbps prices with NBN prices. If we could all get ADSL2+ at 20Mbps the whole NBN discussion would never have gotten started. The NBN will always be more expensive than investing almost nothing in the last mile.

    There are people who are VERY HAPPY with something about 12Mbps right now. The NBN is here to bring everyone to 12Mbps, and 90% of people to 100Mbps.

    I'm not sure what I think of limiting speeds. I keep changing my opinion. It might depend on how much content is quota free. TwistedWire mentioned making something available free to all Australians - should that be speed limited?

    I'll have to think about that
    anonymous
  • Wireless uptake

    I think one of the main reasons for wireless uptake is the huge upfront cost for connecting a line and also the large disconnection fees (which isp's need to put people on 12 month contracts to cover).

    If connections were made for $10-20 with short minimum terms or no disconnection/churn fees i believe for most people would choose fiber over wireless.

    This is with the exception of those who truely need the ability to use the internet on the move.
    anonymous
  • Try living in RIM Port Hell estates

    Having spent the last 3 years fighting to get even the most basic ADSL connection. In this area of the Gold Coast we are desperate for the NBN.

    The Rim's out here are so overly congested that you can't even get .01mbps download of an evening.

    Try letting the kids use things like mathletics or downloading there homework (took 45 mins last night).

    NBN should be looking at the most congested exchanges to roll out the NBN. Crace and Oxenford are two that seem to have the most problems. I know I for one will be happy with anything better than what we are currently getting at the moment .

    700ms to the 2nd hop every night is horrid if your trying to use voip.
    anonymous
  • FAIL

    We do not want this type of pricing structure - we should pay for speed just like in the USA. they get unlimited quota and a choice of connection speeds.
    anonymous
  • EPIC FAIL

    That won't work here.

    The US gets 90% of its data locally (ie, from the US) - thus data costs next to nothing for their ISPs. Here, 90% of our data is international: and although international capacity costs are coming down, it is still VERY expensive data comparatively.

    I'd say data caps are here to stay, for the short to medium term. Unlimited plans are just not feasible here for most people (ie, they cost $100-$200/month, and no-one will pay for it).
    anonymous
  • Wireless Uptake

    It often seems overlooked, that one of the reasons wireless internet has increased is due to the shutting down of residential ISDN services in the last couple of years. The types of people who typically can't get ADSL services due to distance from the exchange.

    Not to mention the notorious congestion suffered on most wireless connections during peak times.

    The speed of ADSL for someone living next door to an exchange is a meaningless metric that is often overused, when comparing the current mishmash of broadband technologies to that available from fibre.
    anonymous