NBNco Price Changes

The company behind the nations broadband network is changing wholesale prices.

As of May 1st2018, the pricing structure will change. NBNco as a wholesaler, are planning to change prices for Retail Service Providers such as Optus, Telstra, iiNet, Dodo and so on. This price change is directly an impact to the RSP, not to the end user (you).

The old (pre 1stMay 2018) pricing structure by retailers was actually not directly consumer friendly. A service of 50Mbps would cost retailers $34 to deliver to you to your door, but you would be paying on average $80. This means connecting a cable from the node or exchange to your house. In order to provide you with actual internet, the RSP needs to buy upstream bandwidth.

To draw up an example, let us assume that the RSP has 5000 customers on a 50Mbps plan. To maintain bandwidth for 100% capacity, RSP should be buying 250,000Mbps (250Gbps) of upstream bandwidth. Logically, this would be a complete waste. More than likely, RSPs would look at upstream of 10Gbps which costs $175,000 per month. So $175,000 bandwidth costs / 5,000 users + $34 cost = $69 cost to the RSP and you are paying them $80. $80 – $69 = $11 “profit” (not including staffing, marketing, other costs)

A variety of RSPs such as Telstra, Aussie Broadband and Exetel are promising user experience at a slightly higher cost, while others are selling cheaper plans. This is where the RSPs business model / customer service comes in to consideration.

Due to the poor planning by these RSPs, NBNCo is forcing them to have some guaranteed bandwidth per customer. As a result, the same numbers used previously will have a different outcome. For every client that buys a plan of 50Mbps, the NBNco is including 2Mbps of guaranteed upstream bandwidth.

Although this guaranteed bandwidth will benefit consumers, it comes at an increased price for the RSP. Rather than NBNCo charging $34, they will be charging $45. But because there’s guaranteed upstream bandwidth, logically RSPs will purchase less. In its place, RSPs will instead spend $140K (for 8Gbps) rather than $175K (10Gbps). Therefore, $140,000 / 5,0000 + $45 = $73 cost to the RSP for the “same” service they are providing as of pre 1stMay. A loss of $4 profit from last months pricing.

While it seems that consumers will gain from this change in pricing (due to the guaranteed upstream), it will likely result in issues. RSPS will likely be forced to cut down on how much bandwidth they buy to save costs, this will result in ‘peak traffic’ times to become increasingly worse. As a result of this, the NBN blame game will continue to prevail, due to incorrect finger pointing.

An industry professional with ten years experience says, “I think we need more transparency from RSPs and NBNCo. I know personally I’d rather pay a premium for a guaranteed speed, where others who don’t use the Internet as frequently would rather a cheaper service that will suffice for basic use”.

Ultimately, it is your choice as a consumer to choose your RSP. The lack of transperancy is making this decision clouded and unfair. Not all NBN plans are created equally.