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29 March 2011 CommsDay Summit Sydney
NBN Wholesale PricingThe devil in the details - Simon Hackett - MD, Internode
Flurry of NBN Legislation
✤ Quotes from CommsDay this week:
✤ Xenophon also managed to win government support for a restriction over NBN Co’s ability to offer volume discounts
Flurry of NBN Legislation
✤ Quotes from CommsDay this week:
✤ The Federal government has offered a written guarantee to cross-benchers Tony Windsor and Rob Oakeshott that NBN Co will supply uniform wholesale pricing across all broadband technologies, including for above entry level products
Pricing NBN Access:‘Uniform’ vs ‘Fair’
NBN Cost Model Is Complicated
“Worked Examples” Provided To Simplify Understanding
Impact of ACCC POI Decision
✤ Adds about $1.46 per cust per month✤ @ 250,000 customers
✤ based on reasonable input value estimates
Total Access Cost Per Month
✤ $25.82 + $1.46 = $27.28+GST per month✤ (at 250,000 customers)
Tenable At Face Value
✤ $27.28+GST per month✤ As input to (say) $60 per month retail price
✤ For broadband + phone ($30+$30)
✤ Entry level speed (12), Entry level quota (30G)
Why model @ 250,000 customers?
So:How Many National RSPs?
5
Why?
High Overheads In The Model
✤ $455,000 per month (NBNCo CSA, CVC, TC, NNI etc)
✤ Absolute minimum required for acceptable performance
✤ Likely to be an under-estimate due to CVC burst requirements
✤ $365,000 (est.) per month (ACCC POI Decision)
✤ Total of approx $820,000 per month of overheads to ‘play’ on the NBN
✤ Annualised cost of almost $10 million (Plus GST)
✤ Around $100m in total overhead cost over the 10 year build period
Artificial Scarcity In The Model
✤ Prices simulates scarcity in a network built with fibre abundance
✤ Copies Telstra Wholesale ADSL smoke and mirrors price structure
✤ Linear CVC cost is ‘bad monopoly’ concept ($20,000/Gigabit!!)
✤ ’50 kilobits free’ (18G/Month) hides the monopoly rent CVC rate
✤ Charging $38 for 100M vs $24 for 12M port also monopoly rent
✤ Singapore circa $17 for 100M
✤ Should copy the competitive industry dark fibre price structure
High Overheads Prohibit Smaller / New Entrants
Not viable to operate below 250k customers
CVC Price Stops Content Growth
Costs skyrocket with increasing usage
The Solution
✤1) Review the ACCC POI Decision ✤ Composite (14+122 POI) Model✤ Enable more direct RSP participants✤ Enable all players to service regional
The Solution
✤ 2) NBNCo charge a higher port price✤ Circa $29 per customer per month
✤ Slash CVC pricing (or just remove it)✤ Deliver 100/40M as the $24 offering
This will help us to achieve“The Future We Were Promised”