The showdown on NBN CVC pricing has been a long time coming. The NBN bestowed an extra 40% of CVC capacity to make lockdown due to COVID-19 more bearable. But it is only temporary. The ending of the 40% uplift inserts a decisive event into what was previously a slow boil. At a time when retail margins are becoming exhausted, something has to give.
Co-authored with Bob James and publishedin Comms Day. read it here Who will blink first on NBN pricing
The valuation of assets is probably the most important decision regulators will face for a network business dominated by fixed costs because depreciation and the return to capital derived from this valuation will account for well over half of total costs.
In some recent work for Fiji, there was some debate about whether assets should be based on ‘actual’ or ‘replacement’ costs. As the following report shows, my view is that both theory and practice support the use of replacement costs. Asset valuation-revised-1
There Is not much more that I can say about Australian National Broadband Network (NBN) pricing. But recently I had the good fortune to apply the principles of traffic pricing – which I have been urging for the NBN since 2009 – to the new submarine cable for the Solomon Islands. It provides an example of why pricing for abundance is better than pricing to reflect, or worse, to create scarcity. Economuse 2020-02-12
This is probably the last review using the method developed and used since 2008. More importantly, retail and NBN pricing are pulling in different directions. While I have a lot of issues with CVCs, abolishing them is not the answer.
The review of September 2018 prices shows that there has not been much movement on the major issues identified with retail broadband prices:
1. Lack of affordable entry-level prices – this is still an issue despite the new NBN Entry Level Bundle; but too recent to be reflected in the results discussed here.
2. Poor take-up of high speeds – slightly better thanks to new High Capacity Bundles.
3. Increasing pressure on ISP margins due to CVC pricing (leading to under-provisioning) – still true, with full impacts felt when the migration to NBN ends.
4. The growing threat (to the NBN) of increasingly competitive mobile broadband – no change.
More details at Economuse 2018-10-04