With the National Broadband Network retail pricing announced by iiNet yesterday, it becomes clear that claiming the NBN is too expensive, a bargain, or little-bear just right for the punters is a tad premature.
As the NBN rolls out over the next decade, households and small businesses will be given the perfect opportunity to reevaluate their communications spend. They’ll have to sign a new contract anyway, so why not shop around?
From a telco’s point of view, it’ll be the mother of all battles to prevent churn. So far we’ve only seen the opening shots.
When Internode announced its NBN retail packages in July, the first major internet service provider to do so, critics jumped on the top-end packages and screamed blue murder at the supposedly-high prices. As I wrote in Crikey at the time, though, we need to compare potatoes with potatoes. Internode’s pricing for NBN packages was more or less the same as for its ADSL packages, but with the goodness of added fibre.
Sign up for a FREE 21-day trial and get Crikey straight to your inbox
iiNet’s plans are “comparable” to Internode’s at the entry level, by which I mean that if you had to choose between them you might well consider factors other than price. But at the top end iiNet’s plans are significantly cheaper.
iiNet’s most expensive residential package provides the full 100Mbps download and 40Mbps upload speeds and a monthly data transfer quota of 1GB (quaintly divided into 500GB on-peak and 500GB off-peak) for $99.95 a month. Internode’s equivalent is double that, $189.95 a month — although it does throw in VoIP telephony and $10 of free calls, while for iiNet that’s a $9.95 add-on. And Internode doesn’t do the on-peak off-peak thing.
A key factor in the difference is that NBN Co’s wholesale pricing changed between those two announcements in what Internode boss Simon Hackett described as a “very substantial” change to the CVC access fee. That’s the “connectivity virtual circuit” fee for an ISP to connect to NBN Co’s points of interconnect (POIs).
The CVC fee has been controversial, with Hackett lobbying heavily for it to be reduced because it impacts smaller ISPs disproportionately.
“This is a change I was really hoping NBN Co would make, but until they made it, it wasn’t sensible to factor it into retail pricing,” Hackett wrote at Whirlpool yesterday. “It has significant impacts on high quota plans, especially (as CVC is all about quota and the consumption of quota).”
Will Internode reconsider its pricing? Absolutely.
“The answer to ‘do we intend to ignore the activities of others’ is clearly ‘no’. Hence ‘are changes likely from Internode?’ … ‘yes’,” Hackett said.
We have yet to see what heavyweights Telstra BigPond and Optus might announce. And we have yet to see whether NBN Co changes its pricing once its learned what it can from the trial sites and the current handful of greenfield sites into the full commercial rollout. That’s scheduled to start in October.
And media coverage has so far paid little attention to cheaper NBN packages offered by Exetel and the pricing hints from budget telco Dodo.
The bottom line is that every telco is constantly tweaking its prices and packaging in response to market conditions, consumer perceptions and all the rest of it. Today is no different — except that the industry is going through its biggest shake-up ever.
In this battle, we ain’t seen nothing yet.
Meanwhile, I have a challenge for the member for Bradfield. Paul Fletcher, if you can provide a reference for where the government has ever said that the NBN would provide “cheaper broadband”, as you were quoted as saying in The Australian today, I’ll donate $100 to the charity of your choice. This is a myth, I believe, and the myths need to die.