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Vocus hoping ACCC can solve broadband affordability if NBN cannot

Vocus CEO Kevin Russell attacks the CVC as a download tax, saying the market value of NBN is far less than what it had cost to build.
Written by Chris Duckett, Contributor
Image: Chris Duckett/ZDNet

With the National Broadband Network (NBN) set to reveal the outcome of its wholesale pricing consultation in the coming weeks, Vocus CEO Kevin Russell has said it would show whether NBN is prepared to put customers on low-incomes before its own finances.

Speaking at the ACCAN national conference in Sydney on Thursday, Russell said the Australian Competition and Consumer Commission (ACCC) has the ability to regulate pricing on NBN's fibre-to-the-node, fibre-to-the-basement, fibre-to-the-curb, and HFC networks, as only the fibre-to-the-premises network was covered by the 2013 Special Access Undertaking between the ACCC and NBN.

"If NBN won't set prices which are fair for people on low incomes, the ACCC has the fallback option of making an access determination, which would give it the power to directly regulate pricing for those 7 million premises," Russell said.

"Speaking on behalf of our NBN customers, if NBN isn't prepared to act, I do hope that the ACCC is."

Russell said by failing to recognise that the market value of NBN is far below what it had cost to build the network, NBN's thinking has been more like a monopoly wanting returns rather than being focused on consumer needs.

"NBN's pricing model is broken," the Vocus CEO said.

"Because NBN's financial targets are based on recovering its cost to build, rather than recognising the real value of the network, prices are far higher than would be achievable in a market-led environment.

"And consumers are paying for it -- literally."

Russell also hit out at the connectivity virtual circuit (CVC) charges that NBN has used to raise revenue on data transferred across its network.

"CVC is a download tax on consumers. It is a completely artificial tax. It charges something for nothing. It creates artificial scarcity where there is none," he said.

"This approach is inconsistent with almost every other telecoms market around the world, where pricing doesn't penalise higher usage. It is inconsistent with the underlying cost of the product, which does not increase with greater usage. And it is inconsistent with consumer expectations for broadband at a fixed monthly price."

Unless a change is made, Vocus would have no choice but to increase its pricing in line with NBN wholesale costs, Russell said.

As the leader of a budget ISP such as Dodo, Russell also went after NBN's discounting that set up 50Mbps as the standard usage tier.

"It helps explain why Telstra's broadband market share has jumped from 41% on ADSL to almost 50% on the NBN, and why the market share of value-providers has been slowly but steadily decreasing since the new pricing was introduced," he said.

In Febraury, Vocus said the variable nature of the CVC pricing model was incompatible with the fixed rates paid by consumers, and that the economics did not stack up.

"No profit margin after costs to migrate, acquire, and serve, together with backhaul and other admin and operational costs," the company said at the time.

The company said NBN pricing was "simply too high", and it was cashflow negative after providing modems and backhaul.

Vocus also pointed to the multi-technology mix of the NBN, saying the resultant inconsistent experience was another pain point.

Consequently, the company said it would focus on selling NBN only where viable, and would shift towards fixed wireless and mobile solutions. Vocus pointed to non-NBN services being simpler with lower operating costs and 5G creating a path for business applications, as reasons for the switch.

Also speaking at the ACCAN conference on Thursday was NBN executive general manager for products Gavin Williams, who said the next round of pricing consultation would focus on affordability for low-income households, as well as getting seniors onto the NBN.

"It will involve, potentially, the creation of plans and programs to allow subsidisation of the cost of broadband connections to those who genuinely lack the capacity to pay for their broadband connection," he said.

"We are currently canvassing a range of options."

Williams also said NBN had seen an average 11Mbps lift on connection speeds by improving the in-home wiring of houses connected via fibre to the node.

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