NBN Co’s plan to raise internet prices has sparked controversy

Australians would face higher internet bills over the next decade on plans to raise broadband prices to regain huge profits. NBN cost explosionsmajor retailers and experts have warned.

The NBN Co, owned by taxpayers, this week introduced a number of changes in online pricing to the competition regulator for approval in an offer to recover billions of dollars in costly explosions funded by taxpayers.

But NBN Co’s proposal, which includes a projected doubling of the price of the lowest tier wholesale NBN plan by 2033, has attracted criticism from the competition regulator, top telcos and experts.

Retailers warn that households will end up paying more for their internet if NBN CO fulfills its plan, while the Australian Competition and Consumer Commission fears it will reduce the number of “reasonably priced” products across the market.

Experts said the controversy highlights deeper problems with the NBN’s direction later more than a decade of costly explosionsarguing that the incoming Labor government should intervene and address urgent issues.

Everything comes as new data shows a a growing number of Australians are frustrated about the quality of online services below current prices.

Higher NBN prices

NBN Co said this week that it wants to “materially evolve its pricing structure” to ensure it receives enough revenue to recoup the cost of building Australia’s broadband network.

It requires approval from the ACCC to implement its plans on Monday as well has officially called for massive changes to the way internet services are provided.

It’s a complicated plan, but the sticking point for some experts and major retailers is the prices, especially a bid to increase wholesale costs for plans with speeds of up to 50 megabits per second (mbps), which is more than 80 per cent of Australians. use.

Under the new structure, the ACCC anticipates a doubling of nominal prices for 25 mbps plans over the next decade, with wholesale prices rising from about $ 40 a month today to $ 104 a month by 2040.

Wholesale prices at 50 mbps will rise from about $ 60 a month to over $ 100.

Those higher prices would be achieved with changes to plan structures.

Plans below 50 mbps would be pooled within bandwidth bonuses, with retailers being charged for exceeding $ 8 per mbps limits per month.

Packages would be reviewed twice a year to see if more data should be included, with the NBN forecasting that data demand will rise 13 percent annually over the next 18 years.

Plans with speeds of 100 mbps or more would work under a different model however, with data limits removed in favor of a flat fee that would increase each year, partly determined by inflation.

The flat rate will rise by inflation (CPI) plus 3 percent in the first few years, before then rising in inflation or by 3 percent annually.

‘Too high’: Price plan hit

According to the ACCC, the model would see plans with speeds up to 50 mbps cost more over the next decade, so they would actually converge with prices for much faster 100 mbps plans.

This is because lower speed plans will be subject to additional costs as data usage increases, and the ACCC warns that demand could even increase much faster than NBN Co. anticipates.

Source: ACCC (click to enlarge).

The ACCC has also raised a number of other issues with the NBN plan.

For example, it has been suggested that the $ 8 excess fee seems to be above the cost of providing additional data to retailers such as Telstra, Optus and TPG.

“These dynamics indicate that a tightening of acceptable access products in the market can be expected,” the ACCC warned.

“This in turn could damage the level of retail competition and result in the supply of retail products in the market at higher prices and speeds more than the needs of the end customer.”

Optus, TPG and Telstra all fear that the proposed model would deliver higher retail prices for Australians, saying they will hand over the rise to wholesale costs.

“Potential providers like Optus will have no choice but to deliver proposed cost increases to our customers,” Optus public affairs vice president Andrew Sheridan said in a statement.

Mark Gregory, an associate professor at RMIT University, said retailers were right to highlight the “excessively high costs recommended by NBN Co for substandard product offerings.”

Government called for action

Although NBN Co argues that the new model will help it pay for debts incurred during the construction of the network, it has suggested a “price cap” to ensure that its revenues do not extend beyond its costs.

But the ACCC fears the safeguard is heavy, as NBN Co will not make enough money soon to recoup the costs anyway.

Experts said the controversy reflects difficulties faced by the NBN in trying to recover from huge costly explosions that have occurred during the construction of the national internet network for more than a decade.

Telecommunications consultant Paul Budde said the only way to ensure that NBN remains affordable under its cost-recovery obligations is if the new Labor government moves to write down the value of the infrastructure.

This would reduce how much the NBN is worth on paper, allowing NBN Co to be much less aggressive with its proposed pricing models.

“The company was backed by the previous government, which wanted to get its money back from its investment in the NBN,” Budde said. TND.

“Because the NBN’s construction costs have skyrocketed, it’s basically the broadband users who pay the price for a bad policy.”

Associate Professor Gregory said the government may need to update its statement of expectations for the taxpayer-owned company as well.

“A major change in direction is needed at NBN Co,” he said.

The ACCC is accepting public proposals for the proposal until July 8.

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