Australians willing to pay for better broadband: NBN

A survey has shown 40 percent of consumers would be willing to pay AU$12 extra per month for 'better' broadband, according to NBN CEO Bill Morrow, who hopes uptake will increase beyond 25Mbps.
Written by Corinne Reichert, Contributor

National Broadband Network (NBN) CEO Bill Morrow has said that consumers would be willing to pay more for "better broadband" services, according to an independent study undertaken by the company.

Speaking during the launch of NBN's Corporate Plan 2017 on Thursday morning, Morrow said that NBN's current speed offerings -- which show the most uptake across its 25/5Mbps speed tier -- suit real-world usage for now, but that he hopes this will change as new applications are developed and data usage grows.

The comment came in response to a question from MyRepublic, which has been criticising the 25Mbps uptake and pushing the topic of being able to offer 1Gbps speeds to NBN users that its customers in New Zealand and Singapore are able to have.

"25 meg is a product that has been declared all around the world as sufficient fast broadband for today's times," Morrow argued.

"Singapore is not really a country that can even remotely be compared to Australia. It's a vertical country that goes up buildings ... we do more than a single tower, we do more than a small city or a comparable capital city."

Morrow added that most Chorus services in New Zealand are VDSL-based, and that NBN actually has "far more" fibre circuits available.

"I would ask why your company isn't selling into those more than you already are," Morrow told MyRepublic.

"I think the reality is that most people out there are saying, 'you know what, what fits my needs is the 25, is the 50, is the 100'. Most of them, we feel, are comfortable in that range. And I hope that changes."

MyRepublic -- alongside other providers including Vocus, Vodafone, and Macquarie Telecom -- previously argued that the only reason retail service providers are not offering 1Gbps is thanks to NBN's connectivity virtual circuit (CVC) and access virtual circuit (AVC) charges.

Morrow on Thursday argued that RSPs also have a responsibility when it comes to shifting their customers over to the same speeds and pricing as they had on their legacy broadband connections.

"As long as the retailers are saying, 'I'm going to map you over like you're on an ADSL-based consumption model under the applications that existed before, the price that you had before', they aren't monetising that growth," Morrow argued.

The chief executive pointed towards NBN's upgrade paths -- including DOCSIS 3.1 on hybrid fibre-coaxial (HFC); G.fast on fibre to the curb (FttC), fibre to the node (FttN), and fibre to the basement (FttB); NG-PON on fibre to the premises (FttP); and carrier aggregation on fixed-wireless, as well as looking into various improvements for the satellite service -- as allowing for higher speeds in future.

"We have done third-party studies that strongly suggest people are willing to pay more for better broadband -- and that means faster, that means consuming more, that means lower latency on it," Morrow said.

"The study that we had, 40 percent of them said that they'd be willing to pay AU$12 more."

In fact, one Australian paid more than AU$200,000 to have NBN fibre rolled all their way to their home to improve their broadband connection. In response to Senate Estimates Questions on Notice this week, NBN said the highest quote it has provided for an individual switch from fixed-wireless to FttP was AU$217,600 in Shaw, Queensland, with the service being built now.

"A single end user applying for a technology choice upgrade will typically pay a significant amount, particularly if theirs is the first request in the area," NBN said.

"In order to provision an FttP service for one end user, significant, complex work is often required at the exchange in order to transmit an FttP service. As a result, the most effective way to lower the price for a tech choice switch would be to aggregate demand amongst multiple end users in the same area."

The highest figure provided in a quote for the switch from FttN to FttP under NBN's technology choice program was AU$149,937 for a single premises in Katoomba, New South Wales -- with the quote declined by the applicant.

"The majority of this figure is related to the cost of equipment in the exchange that NBN may not otherwise have had to install," NBN explained.

"NBN is currently reviewing the way the costs of this type of equipment is allocated and will review this quote as a part of that process."

NBN's new base case shows that 1.9 million, or 17 percent of premises, will be covered by FttP; 4.6 million by FttN and FttB; 1 million by FttC; 3.1 million, or 27 percent, by HFC; 0.6 million by fixed-wireless; and 0.4 million by satellite.

Telstra's receipt monetisation would have reduced flexibility

Also during the Corporate Plan launch on Thursday, Morrow explained that NBN had knocked back Telstra's attempt to monetise certain receipts earlier this week because it would have removed flexibility without adding any value.

NBN's responsibility is to the Australian taxpayers, and any decision that increases complexity and risk should be considered carefully, Morrow explained.

"This is really something Telstra should be dealing with," Morrow said.

"NBN has a responsibility to our shareholders, which is virtually the citizens of Australia. And if we see an opportunity to create more value, we're quite interested in it. If we see something that is neutral or potentially negative, we'll consider it, but if it turns out that we cannot be convinced there's value, or if again it has some risk to it, then we are not going to do it. And it's that simple."

Morrow said NBN saw an uncertain amount of risk in the proposal, adding that it was "not going to jeopardise the taxpayer investment".

"It removes the flexibility that the current two companies, NBN and Telstra, has today. It reduces that flexibility, creates a degree of uncertainty," he said.

"I can assure you there is no difference in terms of the cash flow payments that we intend to make with Telstra ... our rollout schedule is on track, that customer acquisition is on track, that's typically where Telstra receives the payments from NBN. I don't see any change to that."

Telstra had on Wednesday announced that its attempt to monetise certain NBN receipts was knocked back by NBN.

"Telstra announced a proposal to the market on 17 August to monetise a portion of its locked-in recurring NBN receipts," Australia's incumbent telco provider said in a statement to the Australian Securities Exchange (ASX) on Wednesday morning.

"This proposal was subject to the agreement and a number of steps including approvals and consents from investors, the Commonwealth government, and NBN Co. While the proposal is well progressed and supported by equity and debt investors, Telstra has been advised this morning that technical consents from NBN Co will not be forthcoming."

According to Telstra, NBN had said: "Essentially, we can't see how NBN's position can be protected/improved by Telstra's securitisation plan, especially given the unpredictability of our operating environment in the 2020s."

Telstra had earlier this month said the NBN would impact its earnings before interest, tax, depreciation, and amortisation (EBITDA) by around AU$3 billion due to NBN's connectivity virtual circuit (CVC) pricing.

"Given the latest outlook of NBN CVC charges, which we estimate will more than double over the coming years, we now expect the impact is likely to be at least at the top end of this range, around AU$3 billion," CEO Andy Penn said during the company's FY17 financial results call.

As a result, Telstra had said it was aiming to "monetise certain NBN receipts" in an effort to support a capital management program.

"If we were to proceed with these plans, it would involve approximately 40 percent of the total receipts that are expected, representing the already locked-in receipts for fibre and exchanges," Penn explained at the time.

"The scale of the proposed transaction is approximately AU$5-5.5 billion, with Telstra to retain some equity interest. Our intention would be to use the proceeds to reduce debt by around AU$1 billion, with the balance to support a capital management program to enhance shareholder returns, most likely through a series of on and off market buy-backs."

Editorial standards