EXCLUSIVE: Retail ISPs say NBN pricing model must change

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Malcolm Turnbull's mongrel multi-technoogy mix NBN just doesn't work as well as a fully fibre network (Image via @walabytrack)

Leading retailers of Australian broadband ISP services say the NBN pricing model is broken, making high-speed internet connections too expensive for most domestic customers.

Managing Director of ISP retailer MyRepublic, Nicholas Demos has told IA that the NBN Co must reduce its controversial connection charges to retailers. He is among several NBN retailers calling on NBN Co chief Bill Morrow to admit it has made a mistake and to start over on its pricing models.

The NBN levies a connectivity charge, the CVC, which retailers purchase in 100 megabits per second Mbps, as well as a second access charge, the AVC. These charges apply to each individual subscriber that the ISP retailer signs up.

In all, the wholesale NBN pricing structure has four components and the average charge per connection is around $24. It is very complicated and MyRepublic’s Nicholas Demos says this is the major point of contention between the retailers and the NBN Co.

Said Nicholas Demos:

“At the moment, with the CVC and AVC charges, the pricing structure discourages people going higher speeds because it’s too expensive. Some players have cheaper products, like a $29.99 per month price point. But that’s ridiculous and it’s only a speed of 12Mbps download and 10Gigabytes of data. That’s not what the NBN is about, you get more data on your phone.”

MyRepublic is offering a trial retail package at a site near Wollongong, called Gigatown, where a 1 gigabyte download speed is being offered for $129.99 per month.


Mr Demos says customers seem willing to pay this for better speeds.

“NBN Co has acknowledged its pricing model is wrong,” Mr Demos says. Retailers can now get discounted CVC fees, which he says demonstrates that the NBN Co knows the model is not working.

“We know NBN Co is looking at it because they’ve acknowledged the pricing model needs to be changed,” he said.

While it is the pricing model that is attracting the current anger from ISP retailers, the mixed technologies involved in the NBN roll-out are also a concern. Without a full fibre to the home model, it is not realistic to expect consumers to be able to access the Gigabyte per second speeds that are achieved in other countries.


Nicholas Demos said New Zealand provides a good point of comparison:

"In New Zealand, for example, where the aim is to have 80 per cent of households connected with fibre to the home, what is means is that they can just concentrate on one technology. It’s just more efficient. They concentrate on that [fibre-to-the-premises], they make it work and it performs better. In Australia, because we have multi-mix technologies, the resources are across five or six technologies and therefore it can’t be as efficient as it would be if you were only concentrating on one."

In short, fibre-to-the-premises just works:

“Fibre to the premises just works and it performs a lot better. Mixed technologies are just more complicated and there are problems, and that’s why, in Australia, we’re seeing this uproar.”

However, broadband retailer Nicholas Demos does believe the problems are fixable.

“I don’t believe in the technology mix NBN Co is rolling out, but I do believe there’s a chance that it can change over time. For example, in Singapore, the lowest speed is a Gigabyte per second and the government there is talking about 10 to 20 Gig speeds. The market is going to shift very quickly and Australians will begin to understand why we need higher speeds, but many won’t be able to have those speeds because we don’t have fibre to the premises.”


It’s an issue of international competitiveness. At the moment, Australia ranks 53rd in average internet speeds, behind New Zealand at 33, and Singapore in eighth place. Average download speeds in Australia are around 21.3 Mbps, or about 25 per cent of average Singapore speeds. Upload speeds are even slower, at around 5.9 Mbps. According to a report in the Australian Financial Review this week, such slow upload speeds mean that smart home technologies, such as the recently-launched Google Home, won’t work.

Nicholas Demos says Australia might be left behind, particularly small to medium enterprises, which are at the heart of our economy:

For small businesses, it will be hard for them to front the costs for high-speed connections. A Gig speed connection provides great benefits to small to medium enterprises. I mean, I hate seeing New Zealand beating us.

The NBN is supposed to be about higher speeds and making people proud of a high-speed network — and that’s just not happening in Australia."

It seems that, despite the bluster this week from NBN Co chief Bill Morrow, there are signs that retailers are being consulted.


Nicholas Demos says it is important to move beyond the “blame game” and to find real solutions:

“We’re all in this together and shouldn’t be trying to pass the buck. When you’ve got 82 per cent of customers accepting slow speeds on what is supposed to be a high-speed backbone, well, I’m embarrassed.”

If you’re a business these days, forget downloads, it’s all about the upload speed. Big Gig speed downloads make it easier for a family to enjoy Netflix and gaming and everything together. At that speed it all just works. You don’t get buffering and long wait times.

When you don’t have to wait for things, it changes your behaviour. And that’s what it’s about.

Listen to Nicholas Demos from MyRepublic speak to Dr Martin Hirst below:

You can follow political editor Dr Martin Hirst on Twitter @ethicalmartini.

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