Business Analysis

Problems are mounting as NBN Co struggles to stay competitive

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NBN Co needs to provide better quality services to its subscribers before competiton buries it (Image via Pexels - edited)

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

AS WE HAVE mentioned before, things are not all going to plan for NBN Co. As the Minister for Communication, Michelle Rowland, has mentioned, this has more to do with the quality of the service than the technology. This is giving other providers a chance to compete with the NBN and there is a number of smaller fixed-wireless providers throughout the larger cities who are offering such services, especially to people in apartment buildings.

Secondly, those users that don’t spend a lot of time online get better service from mobile operators. This doesn’t suit higher users of broadband services as mobile networks charge more when using larger volumes of data. While NBN Co admits that it is losing low-end users to mobile operators and mentioned that it would come up with strategies to remedy this, there is nothing in its current documentation that shows how they intend to do it.

NBN Co finds itself between a rock and a hard place. In order to stay competitive, it will need to provide better quality services at affordable prices. The company recently launched its Statement of Pricing Intent in which it introduces its migration plan from its 50Mbps service to the 100Mbps service. By decreasing the pricing gap between the two it hopes to move people upwards.

The way that they want to do this, however, is by increasing the price for its 50Mbps service and that could see a further erosion away to alternative operators. The retail service providers have already indicated that they disagree with the proposed price increase of the most popular NBN service.

(Source: NBN Co)

However, it would need support from the Australian Competition and Consumer Commission (ACCC) to increase its price. This brings us to other issues the company is facing. The ACCC has argued that it will investigate the company’s pricing strategy as mentioned in its Special Access Undertakings (SAU) proposal as it questions if its aim to achieve high credit ratings will actually drive up the prices.

This is another serious issue as the credit rating is important for future investments. As we mentioned before, the current government policy could see the burden of the extra costs of the NBN being moved from its subscribers to the Australian taxpayers.

We discussed the SAU in more detail last month and this remains a sticking point. As a matter of fact, this has been an issue ever since it was launched in 2016 and as Grahame Lynch mentioned in his analysis in the Communications Day newsletter of 20 January 2023, despite all these problems and basically without an accepted SAU in place, the NBN seems to be able to move on.

He argued that often the threat of acting has resulted in NBN Co making changes, more or less a situation of muddling on. So, yet another ACCC investigation will see this process moving on most likely throughout 2023.

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.

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