Aussie Broadband Thinks Pricing Relief is What RSPs Need Now

This is what Aussie Broadband CEO Phil Britt expresses as he appears at an annual summit. He believes that the only way the RSPs (retail service providers) could prevent margin squeeze is a pricing relief if they don’t want to be confronted by the idea of being compelled to increase their price or else face a steep loss in their margins in the ensuing two years. The Chief Executive cautions RSPs about being pressured to up their costs by $11 monthly per sub across the board in the coming two years so as to retain their existing margins.

Britt is open to the ACCC’s move to consider a blank slate tactic to NBN pricing in its review announced recently, but at the same time, issues a warning about having to spend two years before the consultation process can be completed. By then Aussie Broadband predicts an industry-wide usage upsurge of an average of at least 20% per year. “In most things telco, prices either go down or included value goes up over time. Yet in NBN’s pricing model for CVC, if data usage goes up by 20%, the cost to retail service providers doubles,” Britt narrates.

As a response to pressure from the industry, NBN Co is suggesting a temporary remedy which involves putting a soft cap on excess costs that comes into effect once the average consumption per service rises by over 7% prior to any rebate, calculated in a three-month rolling average. Then again, the Chief Executive warns that this soft cap becomes realistically worthless until at least May 2022 since there are increased inclusions launched as the answer to COVID-19 that are still in effect today. Britt introduces a modelling based on those inputs showing that despite the soft cap, RSPs will still suffer from a margin decrease of 4.62% in the following 12 months, likewise an additional 5.11% in the 12 months after that. “Ultimately, there’s two things that will happen [in this scenario] - either prices go up, or peak time speeds go down. That’s the only way that providers can make it work,” he declares.

Again, Britt issues another warning that the increase in price would have to be substantial at $5 per month in the first 12 months and another $6 in the succeeding year. “That means a 50Mbps/20Mbps service goes from what’s common in the market today of $69 [up] to $80 a month, or a $132 per year increase in the space of 24 months. I'm not sure consumers are actually going to swallow that.” The Chief Executive goes further saying that what the industry requires is a “bridge” between the present pricing construct and the substitute brand that will emerge from the ACCC consultation.

To quote his own words, Britt exclaims, “It should be noted in NBN’s current pricing consultation that there are 'modest' changes to the inclusions - and underline, bold, circle in yellow the modest - ...[but] we strongly believe NBN needs to urgently rebalance its access prices, and remove usage pricing altogether. We believe the immediate solution is to rebalance the access price to where it needs to be, removing the need for the usage component. Future usage increases can be offset in operational savings.”