Internode reveals NBN pricing but Hackett says network charges will keep access expensive

Internet service provider Internode has revealed its first prices for the National Broadband Network, but the announcement has been accompanied by a statement from managing director Simon Hackett explaining that prices under the network will be higher than many people expect.

The announcement comes one day after the Australian Competition and Consumer Commission released updated pricing for Telstra’s copper networks, while Opposition communications spokesman Malcolm Turnbull has revealed parts of his alternative plan to the NBN.

Internode announced the new pricing yesterday, with plans starting at $59.95 for a “bronze” plan with 30GB of bandwidth at speeds of 12 megabytes per second. These plans range up to the highest speed of 100 megabytes a second, although the cheapest plan on that speed is $99.95.

The most expensive plan is a one terabyte plan on 100 megabytes per second, which costs $189.95 per month.

Internode managing director Simon Hackett says that while the Government promises to deliver comparable prices for NBN services, “a number of pressure points” from the wholesale pricing model make this “untenable in practice”.

Hackett says there will be large monthly overhead costs for retail service providers, and that if the Government were to change this model slightly, then retail prices could fall.

“Solving this issue is essential to ensuring an adequate participation rate by retail service providers in the NBN, and to ensuring consumer pricing is not driven far higher than it would otherwise be driven during the first several years of the NBN’s build phase.”

Hackett also says the ACCC’s decision to introduce 121 points-of-interconnect is “fundamentally at odds with stated government policy in terms of consumer retail pricing outcomes”. He says the figure will ensure the dominance of Telstra, and that “it will cause all consumers to pay more for their internet access as a result”.

The issue of POI has been hotly debated over the past year, as telcos warned that too few would cause a situation where market leaders would be able to cover more ground, where smaller telcos would be pressured out of the market.

The issue at hand with Hackett’s response is a $20 per megabit monthly fee in the wholesale model, charged when ISPs actually connect to the POI. This charge is a “collar”, Hackett says, that constrains the size of each access connection based on that $20 fee.

“It is not a charge based on real costs; rather, the quantum of this charge has simply been chosen to fill in an otherwise huge hole in the Federal Government policy requirement that the network return funds to the Commonwealth at a commercial rate and in a short timeframe (relative to the expected lifetime of the network).”

Hackett says the Government needs to provide the first 200 megabits free of charge, and then only charge above that rate.

“NBNCo have a stated intention of reducing the CVC ‘per megabit’ rate in later years of the network lifetime, and delivering 200 megabits per CVC without initial charge would simply mean that the point at which CVC per-megabit rates reduced would be delayed to a reciprocal extent.”

However, while Hackett warns that prices won’t be any lower under the NBN as a result of this, there is some hope that internet prices could fall in rural areas as a result of yesterday’s ACCC announcement.

The announcement stated that competitors can now access the Telstra network for cheaper, with analysts saying the result could see lower internet prices in regional areas. Four wholesale phone prices have been consolidated into two, backdated from the start of July.

“These measures will promote certainty and predictability in the way the ACCC will calculate prices for these services for the next 10 years,” outgoing ACCC chair Graeme Samuel said in a statement.

The decision only affects the copper network, and not the NBN.

Meanwhile, Turnbull has begun revealing parts of his alternative plan to the NBN, at the Committee for Economic Development of Australia event this week.

The Coalition plans to stop construction of the NBN if its wins power, and instead construct a mix of fibre-to-the-home and fibre-to-the-node networks in dilapidated areas.

He also says abandoning the construction of the NBN would involve certain costs, but that these would be cheaper than by going ahead with the construction of the network itself.