NBN Co fails to improve service conditions

NBN Co has rejected proposals for improvements after complaints were lodged against its lack of quality service by leading retail service providers, writes Paul Budde.

AS PART OF the Australian Competition and Consumer Commission (ACCC) industry consultation process, Telstra and Optus have again complained about NBN Co's lack of service quality improvements in the wholesale broadband agreement (WBA). NBN Co has rejected all proposed improvements by Telstra and Optus, leading retail service providers (RSPs) to call for intervention by regulators and the Government to raise standards.

One of the major points of contention is the regulated special access undertaking (SAU), which governs pricing and non-price terms for NBN access until 2040. The revised SAU seeks to increase prices without adequately improving most broadband services, leaving RSPs dissatisfied. While NBN Co claims to have made some concessions in terms of service standards, the RSPs argue that these changes are insignificant.

As discussed before, the SAU has been delayed repeatedly. This also clearly shows the monopolistic behaviour of NBN Co. It only makes piecemeal concessions to keep the process going, without seriously addressing the underlying issues. It can do so because it has a near-monopoly on fixed-based retail broadband infrastructure.

Watchdog rejects NBN Co pricing proposal

NBN Co is once again facing an uphill battle as the ACCC has rejected its proposal for pricing over the coming decades.

Telstra and Optus have expressed their frustration with the lack of progress in commercial negotiations with NBN Co and are now focused on seeking change through the regulated process, rather than continuing the drawn-out SAU process. Telstra emphasises the need to expand baseline service standards to address concerns raised by RSPs, including outage notification, priority assistance and speed rebates. It also argues for consequences when NBN Co fails to meet service standards.

One specific concern raised by Telstra is the use of copper-based networks as a roadblock to improving service quality. They assert that relying on fibre-to-the-premises (FTTP) technology would solve many problems for end-users, but the number of customers benefiting from FTTP in the near future is limited and higher-priced plans would be required for the upgrade.

NBN Co's position is that it is challenging to improve service quality standards while still supporting customers on copper-based networks due to the associated costs and potential revenue impact. It argues that a significant improvement in service quality will come when more customers are migrated to fibre technology. However, NBN Co's upgrade program progress and the willingness of customers to pay higher prices for the upgrade remain uncertain.

It is very clear that we again run into the political problems created by the previous Coalition Government. Rather than implementing the original FTTP infrastructure, it changed that in the Multi-Technology Mix (MTM). This is resulting in a second-class infrastructure that is now the reason for so much pain both for the RSPs and NBN Co.

Don't expect better-quality NBN anytime soon

A lack of technical innovations is causing a slump in the demand for better-quality broadband.

In order for NBN Co to recoup the money wasted in deploying the MTM policy and to invest in the upgrade of the second-rate infrastructure to FTTP, it has higher costs. It wants to recoup them through wholesale prices and ultimately, it is the customer who pays for this. Good quality broadband is becoming too expensive for many customers so they won’t be able to get the benefits of using this national infrastructure.

Telstra calls for clear consequences for NBN Co's failure to meet baseline service quality, suggesting reduced capital expenditure or financial penalties tied to price and service quality. It stresses that the current SAU is unacceptable without such consequences. In contrast, NBN Co believes it has market incentives to improve service standards, especially as it faces competition from other networks and it highlights its investment in upgrading copper services to fibre as a strategy for improving reliability.

Telstra proposes rebasing data inclusions in bundle plans and additional capacity to reflect increased customer usage. Something that will certainly not be in the interest of customers. NBN Co counters that they have made significant concessions, balancing price reductions with the need to invest in network quality and capability.

The NBN remains a big mess; negotiating for service quality improvements between NBN Co and RSPs remains an uphill battle. It is clear that regulator and government intervention is needed to address the power imbalance and raise standards. The future of Australia's national broadband network and the satisfaction of its customers remain uncertain amidst these negotiations and debates.

The latest data from the ACCC for the March quarter reveals several trends in the NBN wholesale market.

Problems are mounting as NBN Co struggles to stay competitive

Australia's NBN provider is facing tough times ahead, needing to provide better services at affordable prices in order to stay competitive.

Here are the key findings:

Growth in 25 Mbps internet accounts: The number of 25 Mbps internet accounts increased by 125,000 to reach approximately 1.4 million.
Decrease in 50 Mbps tier: Although the 50 Mbps tier remained the most popular, accounting for 52% of the market, it dropped by 2.1% to just over 4.5 million accounts. This decline is likely attributed to the removal of wholesale discounts in the previous year.
Increase in 250 Mbps plans and above: The uptake of 250 Mbps plans and above rose by approximately 25,000 services during the quarter, reaching over 198,000 services, or 2% of the market.
Decline in Sky Muster plans: Due to increasing competition in the satellite sector, Sky Muster plans witnessed a continued decline. They fell by almost 6,000 services during the period, totalling slightly above 96,000.
Increase in residential NBN services: The overall number of residential NBN services grew by more than 27,000, or 0.3%, in contrast to the previous quarter's decline of 0.1%. There was a significant increase of 45,000 services transitioning from Fibre to the Node and Fibre to the Curb to Fibre to the Premises.
Average bandwidth: The average bandwidth exceeded 3 Mbps, showing a slight increase from the previous December period.
Market share changes: Telstra, TPG and Optus experienced a 0.9% decrease, or a loss of 58,000 services, in their market share. Vocus, on the other hand, gained a boost of 0.3%, reaching its highest-ever market share of 7.5%. Aussie Broadband, Superloop and Southern Phone also saw growth, collectively holding a 15.4% market share.

These findings provide insights into the shifting trends and dynamics of the NBN wholesale market in Australia during the March quarter.

Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.