The two major problems with the National Broadband Network business model are the pricing structure and the future level of prices.
In November 2016, the nbn conducted its third secret consultation on CVCs; a controversial aspect of its pricing structure. It is still fiddling with a hopeless construct. The pricing structure is too complex, does not lead to affordable retail prices and will not lead to the transformational outcomes expected from this broadband project.
Worse, the nbn clings to the hope that it can turn a profit on a very expensive project which was priced initially to smooth migration from legacy copper networks. This will mean increasing wholesale revenues per line (ARPU) over time; which has not been the case historically for broadband ARPU.
For more on the latest consultation, read economuse-2016-11-30
The Ministry of Business Innovation and employment NZ is moving to the building block method (BBM) adopted by the ACCC some years ago.There are several ultra-fast broadband providers in NZ and one of them also has a copper network with no decommissioning deadline. The Ministry is seeking views on how this wholesale sector should be regulated from 2020.
My submission suggests that the BBM is just one step towards the utility style regulation that it wants. NZ has the opportunity to also adopt utility style wholesale pricing which addresses its concerns about anchor products, encourages adoption and use of broadband networks while avoiding the mistakes made by Canada and Australia.
The submission can be accessed here: NZ-2016
This week, Bill Morrow announced another tweak to CVC pricing which seems to imply a $1.75 cut in the current $17.50/Mbps CVC price as early as July. But even with this and tiered discounts (for which an implementation date has yet to be announced), CVC costs per end user are going to be double what the sector is looking for.
In the PC world we have seen that bigger chips and improved performance have been closely followed by more sophisticated software that eats up the new capacity. But, we have a chicken and egg situation with the NBN. We know that users are not prepared to pay for speed. Users will not need more speed until the applications require them. And the applications will not arrive until users have the speeds to use them.
We can cut through this impasse and unleash innovation if nbn™ Co. turns on speed with just one or two AVCs (say, up to 100 Mbps and unlimited). It would catapult Australia to the top of global speed ratings. More importantly, Australia would become the global lab for developers looking for ubiquitous, true broadband.
NBN is doing another consultation on CVC pricing with some of its customers. CVC pricing has been a problem for the NBN from the outset and these secretive consultations do not reflect the openness and transparency promised the current management team.
However, enough details have been leaked to make some comments on the latest ideas; which are due to be trialled from April. I just wish it would try the ideas I have been telling it for over 6 years now.
So, here it is: Economuse 2015-11-30
NBN pricing is back under the microscope with attacks from industry heavy weights like iinet’s Chief Technology Officer, Mark Dioguardi, and serial telco entrepreneur Bevan Slattery who recently called CVCs “evil, stupid and counterproductive”.
This column looks at the challenges for CVC pricing posed by iinet in the context of increased video streaming.
T o read more, click Economuse 2015-05-14