Ergas advisor now NBN pricing chief

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.

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".