An industry insider has claimed that NBN service may soon get worse because the government-owned provider is preparing to hike its wholesale prices, while another has lashed out at its “720-page” supply agreement as stifling market competition.
Yesterday, the Telecommunications Industry Ombudsman (TIO) released a report on complaint volumes it received from consumers and small businesses, which showed modest falls in complaints about the NBN in the first six months of 2018.
That led the ombudsman to suggest the seemingly ever-increasing volume of complaints in the sector could be “turning a corner”.
But Laurie Patton, former executive director of Internet Australia – a member-based not-for-profit policy think tank – poured cold water on that optimism and claimed the fall in customer complaints is “most likely temporary”.
Mr Patton told My Business that the improvement in complaint volumes came down to the NBN discounting its wholesale prices.
“The discounts, which are about to come to an end, allowed retailers to buy more bandwidth from NBN Co. This meant congestion levels experienced by some customers temporarily fell,” he said.
“The people who advised the government back in 2013 are the ones to blame, as are the current NBN Co board members who refuse to concede that what they are now building is a dud.”
Wholesale prices impacted by transition to bundling
In December 2017, NBN Co unveiled a new wholesale pricing structure, which it claimed was “designed to improve customer experience and meet the growing demand for fast broadband in peak hours”.
Under the overhaul, access and bandwidth charges were bundled for the first time to deliver a simpler pricing structure.
These bundles were charged at $45 per month for 2Mbps included bandwidth and $65 per month for 2.5Mbps capacity.
It said at the time that these changes would take effect from the second quarter of 2018 and that the new bundles “include nearly double the current average capacity being purchased by retailers across all NBN fixed line services”.
The discounts to which Mr Patton refers were, according to NBN Co, a temporary bandwidth promotion that is due to end on 31 October this year, having run since last December.
But these have already been superseded by a new structure of wholesale discounts that took effect from May this year.
A spokesperson for NBN Co told My Business that its pricing discounts are designed to give internet providers “choice and flexibility to sell a range of retail plans to meet the different needs of Australians”.
“Our new discount pricing bundles aim to show the capability of the nbn™ access network with a more affordable price and packaged solution to drive both a higher speed and better customer experience, particularly during peak times,” the spokesperson said.
“Since introducing our new pricing discounts, we’ve seen a significant shift in people on higher speed plans, with the amount of wholesale plans of 50Mbps or above more than tripling from 16 per cent to 50 per cent.
“At the same time, the average bandwidth network congestion has been significantly reduced, from more than five hours per customer, per week to 38 minutes, allowing people to have a much better experience.”
The spokesperson moved to squash speculation of an impending surge of congestion resulting from its pricing structure.
“We aren’t expecting a significant immediate increase in bandwidth congestion at the conclusion of the promotion, as part of retailers signing up to the interim offer is a requirement to deliver this level of bandwidth to customers for a 12-month period,” they said.
“NBN Co also has measures in place with internet providers to ensure bandwidth congestion is managed and minimum level of service are delivered to Australians.”
Telstra did not directly respond to questions about pricing. Instead, it said via a spokesperson that the improvements in customer performance in the second half of the financial year are “reflective of the work taking place across the business to significantly improve the experience we are delivering for our customers”.
“Specifically, we have made great strides in improving the nbn experience including providing a Telstra Smart Modem with mobile back up to many customers and moving many of our fixed-line nbn customers to the Standard Plus Speed tier,” they said.
Optus has also been approached for comment.
Parliament told of competition woes impacting internet industry
Incidentally, the federal House of Representatives’ Economics Standing Committee held a hearing on impediments to business investment at the same time the TIO report was released.
The committee heard from Michelle Lim and David Forman of Commpete, an organisation representing challenger digital communication providers.
Ms Lim hit out at Australia’s approach to competition in the sector, claiming the country “has been much less pre-competition in its regime” than other countries like the US.
“The NBN was meant to address Australia’s mediocre standing in this space… intended to build a new, future-proof access market [and free of retailer control],” she told the committee.
“The NBN vision has fallen short.”
According to Ms Lim, policymakers have increasingly responded with regulation, but that addition regulatory framework has heaped more cost onto the challenger businesses it is meant to support.
As a result, she said the top three providers now occupy 90 per cent of the market, with 500 other businesses duking it out for the remaining 10 per cent of market share.
Mr Forman also criticised the complexity of NBN Co’s wholesale agreement, which he said “runs to about 720 pages”.
“If you’re a very large business, you might have enough lawyers to [cope with] that, but most businesses don’t,” he told the committee.
“It’s completely open to NBN to reconsider what it’s trying to achieve and reconsider its wholesale agreement … it can reduce that to 10 pages.”
Additionally, Mr Forman suggested that customers are not staying with the major providers by choice – he said that as an industry, telecommunications has the worst reputation, perhaps save for the banking industry – but that switching costs are locking many customers into their existing provider.
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