Pricing Myths

One of the most prolific myths surrounding the NBN is that it will be too expensive to have an NBN connection, particularly for low income earners.

As NBN retail pricing has been gradually released, we have seen a number of disingenuous and misleading statements from the Liberal/National coalition, particularly from MPs Malcolm Turnbull and Paul Fletcher.

First, we had Malcolm Turnbull attack Internode’s NBN pricing as being too expensive, despite the fact it was identical to their own ADSL2+ pricing, and much cheaper than any ADSL2+ pricing going through Telstra’s network.

Shortly after, the coalition’s attack was dealt a seemingly serious blow when Exetel released their pricing, offering plans that not only drastically undercut Internode, but also included an entry level some 30% cheaper than the cheapest copper-based phone+ADSL service from anyone.

Meanwhile another ISP, DoDo, announced that their NBN pricing would also begin at “below $40”. Amazingly, the response from Paul Fletcher was to attack the “discount ISPs” in Parliament! This drew a stinging rebuke from the CEO of DoDo.

A further blow to the Coalition’s myth appeared with the release of NBN pricing by Australia’s number three ISP, iiNet. iiNet’s pricing was slightly lower than their copper at the entry level, and considerably cheaper than either Exetel or Internode’s high-end NBN pricing. The pricing was also drastically lower than Telstra’s current phone and broadband services.

So what was the Coalition’s response? While Malcolm Turnbull sensibly remained quiet, Paul Fletcher issued a truly bizarre press release, which not only made ridiculous pricing comparisons at the low end, but actually criticised iiNet for high-end plans that were too cheap!

I kid you not. The coalition have so far attacked NBN retail pricing for being too high, too low and in the middle. One wonders what they would be happy with.

Here’s a example of misleading figures from Fletcher’s press release (Emphasis mine):

“I calculate that iiNet’s entry level naked DSL* product today costs around 70 cents per gigabyte – but its new entry level NBN product will cost $1.25 per gigabyte, or nearly 80 per cent more…iiNet’s entry level NBN product will cost $49.95 a month, for speeds similar to today’s ADSL2+ broadband (12 megabits per second down and 1 megabit per second up) – with a download limit of 20 gigabytes in peak times and a further 20 gigabytes in offpeak times. Today,  iiNet’s entry level naked DSL product costs $69.95 but offers download limits which are two and half times higher, at 50 gigabytes peak and a further 50 gigabytes off peak.”

This is an absolutely ridiculous comparison, because iiNet also offer a $69.90 NBN plan. That is, a plan that is the same price as their entry level Naked DSL plan. What’s more, the NBN plan includes double the amount of data compared to their Naked DSL plan.

In other words, it is impossible for an iiNet NBN customer to be worse off than an iiNet Naked DSL customer. iiNet have simply added a much cheaper option to their product list. As is made quite obvious from the table below, iiNet’s customers therefore have the choice between paying 15% less per month on the NBN for a entry level plan, or paying exactly the same as they do now but getting double the included data:

iiNet Naked DSL v NBN pricing

For a more complete comparison of copper versus NBN pricing, see the table below. It compares iiNet’s NBN and copper services, plus Exetel’s NBN services (budget NBN), TPG’s copper services (budget copper) and Telstra’s copper and cable services (Current market leader). Note that because Internode have now announced they will be reviewing their NBN pricing, I have not included them in this comparison.

NBN versus Copper Pricing Comparison (Click to Enlarge)

NBN versus Copper Pricing Comparison (Click to Enlarge)

5 Responses to Pricing Myths

  1. DenisPC9 says:

    The average person is probably only peripherally interested in the NBN at this stage. Its probably like spruiking in February who will win the Grand Final.

    One thing is a sure bet, when it comes to the Mums and Dads deciding on the take-up they wont be listening to the Malcolm Turnbulls of this world. They will be listening to the people who tune and operate their many digital devices they use at home.

    And who are they, their technology savy children! They will be the household drivers. They are no treally interested in the esoterics debated on these fora, all they want is speed and capacity.

  2. Steve says:

    Pricing plans for terrestrial services in Europe often do not include volume limits. A super-fast network with a volume limit is not logical. Simply watch your volume limit get swallowed faster.

    When will Australia catch up? The marginal cost of production to transport another byte of data is zero. The price charged is therefore 100 percent margin. This is a most obvious form of gouging.

    Why will consumers want a fast service when they are unable to watch movies, move large files, and other high volume services witout running into these unnecessary volument limits?

    This manner of pricing is a form of theft and should be abandoned. NBN should provide limitless volumes. There is no scarcity model here. The price charged should be for conneciton, not volume.

    • NBN Myths says:

      Steve,

      Volume pricing is not really anything to do with the NBN because they don’t directly charge for volume. The NBN wholesale charges comprise two components, the AVC (individual port speed) and the CVC (total bandwidth per ISP at each POI). The ISPs base their charges on these NBN charges and also the cost of their own network and providing access to the worldwide internet. While not strictly volume-based, the total bandwidth charges the ISPs must pay (both the CVC and international connectivity) are impacted by the volume users download, so their costs do vary based on volume, particularly during peak periods.

      That said, there are a few unlimited-data NBN plans available now. Pennytel (part of iiNet) probably have the best examples. Check them out at https://www.pennytel.com.au/penny-broadband/nbn-deals

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: