NBN is forecasting more than a million Australians will sign up for faster speeds on the national broadband network by the middle of this year, thanks to a long awaited promotional price cut.
In the offer, announced in December and revealed by The Australian Financial Review in October, NBN is bundling together access and capacity charges for its higher speed 50 megabit per second and 100Mbps plans as a single price.
The wholesale cost of the 50Mbps plans was cut to the same price as the 25Mbps plan.
At the end of December, there were about 600,000 end users on 50Mbps or 100Mbps plans, according to NBN, or about 17 per cent of subscribers.
The government-owned business is forecasting to have close to 1.6 million end users on those two higher tier speed plans by June, accounting for 35 per cent of the subscriber base.
NBN said, to date, 200,000 new end users had been moved onto the promotional 50Mbps plan. A quarter of those were new services while the rest were upgrades from the lower speed 25Mbps plan.
Retail service providers have two fees they pay NBN. One is the fixed monthly Access Circuit Charge (AVC), a per-customer charge based on speed tier chosen, and the second, more controversial, Connectivity Virtual Circuit (CVC) charge, which is based on the amount of capacity retail service providers buy.
The CVC charge has been a plague on the NBN, retail service providers and consumers. Due to the expense of the CVC charge, compared with traditional DSL line rentals, many service providers have been buying limited capacity to protect margins but, during peak periods, this has resulted in some consumers experiencing lacklustre speeds.
Range of initiatives
On Thursday, the Australian Competition and Consumer Commission released figures that showed service providers were increasing the amount of CVC they were buying – up 38 per cent in the December quarter – as a range of initiatives, including NBN’s promotional offer and the watchdog’s speed monitoring and advertising standards programs, loomed over them.
In the three months to December 31, the amount of CVC acquired per user jumped from 1.11 megabits per second to 1.53 Mbps, according to the ACCC’s NBN Wholesale Market Indicators report.
The report revealed users were overwhelmingly signed up for NBN’s 12Mbps and 25Mbps plans.
More than 1 million users had 12Mbps plans and 1.9 million had 25Mbps plans, while just 158,959 had 50Mbps plans and 400,848 had 100Mbps plans.
NBN expected service providers to upgrade hundreds of thousands of users over the coming months. It said about 30 per cent of new weekly orders were for 50Mbps plans, whereas before the promotional offer only 3 per cent of consumers were opting for that speed.
The trend will be music to NBN and the government’s ears as the project has increasingly become a public relations nightmare and there is believed to be impetus to find a long-term solution to the issue, rather than just the promotional offer.
The price of the CVC has been so high because the NBN is forced by the government to make a commercial rate of return on the $49 billion infrastructure project. NBN has a target average revenue per user of $52 that it needs to achieve to pay for the build out, leaving little room for service providers to turn a profit when consumers, on average, do not want to pay more than $60 a month, leading to providers buying less capacity and at times blaming the Coalition’s multi-technology mix for poor outcomes.
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