John Linton
I was interested to read Mr Quigley's comments on NBN pricing to the Senate as reported here:
http://www.computerworld.com.au/article/347765/isps_pay_300_per_connection_tassie_nbn_stage_one/?fp=4&fpid=5
It's a novel approach to pricing and, I suppose, it simplifies the problems for their billing system. The report doesn't say whether that price includes GST but that makes only a small difference. Assuming that the reporting is correct a monthly cost of $A27.50 (plus interest giving an ISP costs of approximately $27.50 per month excluding the back haul) for a 25 mbps service is not particularly exciting and doesn't compare particularly well with ADSL2 costings from reasonable carriers but is certainly a little less than Telstra charge for a 256/64 kbps (amortising Telstra's activation fee over twelve months) ADSL1 connection to Exetel though the back haul costs for an NBN service are significantly more expensive in Tasmania.
Comparing those announced costings with current ADSL1 costs to Exetel for Telstra 1500/256 kbps circuits in Tasmania the cost of an NBN fibre service connected to Exetel's Hobart PoP will be more expensive due to the horrendously expensive back haul costs in Tasmania. In a mainland State the NBN costs would be more than a Telstra 1500 service and more than double that of an ADSL2 service. But, as the early days of Telstra's Point Cook trial indicate, people are very enthusiastic about taking up a fibre service and the cost, at least for those early adopters, is not really a major consideration.
So, the first round of NBNCo pricing is good enough not to frighten the horses and will allow the service to be offered at around today's higher end ADSL2 pricing - which the majority of Australian users are obviously very happy to pay (assuming the reported pricing is correct).The next interesting step is to see what the three companies (iPrimus, Internode and iinet) now charge for the services with NBNCo having made the cost of the service (minus the IP content and 'administration costs) so very public. It may be even more interesting to see what, if anything, Telstra do both in terms of adjusting their future fibre pricing and whether or not they see such pricing as 'predatory' - something they have a great deal of experience in assessing in terms the ACCC's views.
Looking ahead, to what the "National NBNCo pricing will be in July 2011" in mainland capital cities is more interesting. Assuming Labor manages to win the imminent federal election then it would be likely that the "NBN2" will have continued to be built and deal/no deal would have been reached with Telstra which will have a material bearing on the competitive nature of fibre pricing to the end user. Assuming Telstra is still a 'player' then it could also be assumed that NBNCo will be forced to offer something along the current pricing - around $30.00 per month (however that is structured/re-structured) for a fibre service and the back haul costs to mainland capital cities at least will be something like a tenth of the Tasmanian costs. If the Point Cook experience is valid for other areas that will mean that Telstra's ADSL1 (and any Telstra Wholesale customer's ADSL1) customer base will disappear as soon as fibre becomes an option to those users. No question or doubt about that - though a great deal of doubt about that time frame....could be quite a while.
What will happen to ADSL2 users when fibre becomes an alternative - different scenario. Firstly fibre will be at least double the cost of a non-Telstra ADSL2 service (ignoring the need to have some sort of telephone line charge with ADSL2). Secondly the 'independent' ADSL2 DSLAM owners have a very commanding interest in competing with the fibre services for as long as they can and their pricing can allow them to do this. For all but the speed freaks an ADSL2 service could be more suitable for their immediate needs (as long as it was at a better price) so it will take much longer for fibre to over run ADSL2. Of course, the speed totally depends on fibre pricing and, perhaps to an even greater extent depends on ADSL2's need for a Telstra PSTN line which cripples the ability to move the price paid by the end user for an ADSL2 service.
So now the first pricing has been 'officially' announced the future of ADSL is put more sharply in perspective.
Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46