Australian broadband users are finally doing what the NBN wants

NBN

NBN customers are rapidly upgrading to higher speeds in a move that suggests the broadband company’s strategy of cutting wholesale prices is paying off.

The latest quarterly Wholesale Market Indicators Report from the ACCC, released today, found that more than a third (35%) of all NBN residential services are now on 50Mbps plans as the rollout of the network continues.

Signups for 50Mbps increased by 47% in the June quarter to a total nearly 1.5 million, a 900% increase on six months earlier when the subscribers sat at just 159,000 amid complaints about cost and slow services.

The number of 25Mbps plans declined by 15% on the previous quarter, while the number of 12Mbps services increased 5% and 100Mbps services fell 3%.

The slow take up of higher broadband speeds came amid pressure on the government-owned NBN to maintain margins and an ROI on the $50 billion project which the government plans to privatise once completed. Higher speeds deliver better margins for the wholesaler than 25Mbps and under.

Earlier this year, the NBN dropped the wholesale price of higher speed plans in a bid to lure customers to higher tiers. While 80% of users chose 25mbps, the NBN cut the monthly wholesale price of a 50mbps plan by 27%. The move appears to have worked.

Retailers have also moved to pass on those reductions with Vodafone cutting $10 off the monthly price of its unlimited 50Mbps plans so existing mobile customers can get the speed for less than $60 a month.

ACCC Chair Rod Sims said growth 50Mbps plan sales for two consecutive quarters reflects the market’s response to the incentives from the NBN.

“A more than nine-fold increase in 50Mbps services so far this year shows that higher speed plans can be delivered if the incentives are right. We are pleased to see retailers responding to their customers’ needs,” he said.

The ACCC has also seen a major increase in retailers in the market and speed improvements in the connectivity virtual circuit (CVC), after the NBN discounted the virtual charge it levied on retailers to access faster network speeds.

Overall market shares of the main players remained stable.

“It is good for competition that retail service providers with smaller market share like Vodafone and MyRepublic are connecting customers at a greater number of points,” Sims said.

Average CVC per user rose 7% last quarter to 1.66Mbps in June 2018.

The ACCC chairman said average CVC per user is an important indicator of how service providers are provisioning their network to meet customers’ expectations of broadband speeds.

By the end of June, the total number of wholesale residential broadband access services supplied by the NBN rose by a little over 5% on the previous quarter, passing 4 million for the first time.

The June quarter Wholesale Market Indicators Report is available here.

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