NBN wholesale pricing model threatens unlimited plans, telcos warn

The National Broadband Network has once again been thrown back into the spotlight, with telcos warning the network’s current wholesale pricing plan could see unlimited download packages done away with as they become too expansive for retailers to offer.

The opposition comes as telcos and experts have also called on the Government to once again guarantee that it will not compete with private retailers and offer better wholesale prices to some customers over others.

This morning telcos Optus and Internode complained the wholesale pricing model proposed by the NBN is too costly and that it will see unlimited download packages become obsolete.

Optus general manager of regulatory affairs Andrew Sheridan told the Australian Financial Review that NBN usage fees were “too sensitive” to changes in data usage, and warned that users who want to use the highest possible speeds could be charged with extraordinarily large bills.

“In today’s world, you have a lot more capacity in deciding how you pass on the cost to end users,” he said.

“A lot of packages out there today have an upfront fee and a data allowance – there’s no charge for the amount of data you use unless you go over your allowance bundle.”

But this isn’t the case with the proposed wholesaling model for the NBN. Instead, there is one charge for data usage.

Ovum research director David Kennedy explains that in the NBN pricing model, retailers will be charged more for usage rather than the actual connection – but this could fluctuate as users want to download more, and larger, files.

“That has implications for the amount retailers will pay for usage, and they may very well pass on those costs to consumers.”

This is a legitimate concern, given that the NBN Co’s own corporate plan shows that usage charges will make up 30% of its revenue by 2025.

“This also means that, for example, unlimited plans could become unsustainable. You won’t allow people to rack up huge usage for the simple reason that it generates a higher proportion of the wholesale price.”

Internode carrier relations manager John Lindsay also said this morning that some retailers may spend less on technical parts of the network that would provide users with a slower, more unreliable service.

“The inevitable effect of this is, when you get above entry-level access and include more gigabytes of usage, the price will rise much more linearly than today.”

Kennedy agrees this would be the case under the model the NBN is proposing.

“The effect for the customer in that case would be that from time to time you have slower download speeds. In principle, I don’t think that’s necessarily a bad thing as long as the customer is aware of that upfront.”

“The retailer may buy less backhaul, but download speeds in peak times may be slower than usual.”

Meanwhile, debate continues in Parliament over the wording of the NBN legislation.

Independent senator Nick Xenophon has introduced amendments that would see NBN Co. prohibited from offering any wholesale customers a better price than another, with the view of creating a “level playing field”.

“I do not believe NBN Co. should be allowed to provide some carriers with preferential pricing, terms or conditions,” Xenophon told the AFR.

The concerns come just a week after the NBN Co. announced the launch of its second testing sites would be delayed as a result of Telstra postponing its shareholder vote on handing over critical infrastructure.

“Given this, we have now reached the point where a July 1 meeting is no longer practicable,” Telstra said in statement to the Australian Securities Exchange last week.

However, NBN Co. also added that negotiations are “progressing well”.

Meanwhile, NBN Co. chief executive Mike Quigley told a Senate committee yesterday that its relationship with the Government may impede productivity, saying that it receives more questions on notice than any other company.

“I just hope we don’t see that kind of ratio we have seen on questions on notice also happen with freedom of information, because it will consume a chunk of the company’s resources,” he said. ”We have just got to get a balance there.”