The NBN is cutting wholesale prices for faster broadband

(Source: NBN)

The NBN is cutting the prices of faster broadband speeds by up to a quarter from 2018 in a bid to lure customers onto higher tier products.

Faced with a barrage of criticism and growing perceptions that the $50 billion project is delivering a substandard product, amid 80% of users choosing the minimum speed of 25mbps (megabits per second), the NBN will cut the monthly wholesale price of a 50mbps plan cut by 27%, to $45, with 2Mbps of bandwidth, while pricing for a 100mbps plan will fall by 10% to $65, with 2.5Mbps capacity included.

With the roll out of the National Broadband Network due for completion in just three years, a little over half of Australians now able to access the network, and a growing question mark over the long-term commercial viability of the government-owned business, the move appears to be something of a taste test of the NBN’s ability for users choosing slower speeds based on the cost, but will also squeeze the company’s margins.

The discounts will apply for 12 months from the date a user signs up to the new plan.

Source: NBN

While there’s no guarantee retailers will pass on the savings, the NBN is also seeking to address the issue of bandwidth, which led to slower speeds and forced Telstra and Optus to offer refunds to around 50,000 customers for premium packages that failed to deliver the speeds promised.

The new plans, which begin in the second quarter of 2018, also change the way the NBN sells its product to retailers, ditching the old two-part pricing model, which saw some retailers attempt to take shortcuts in order to save costs and boost margins, to a bundled product.

In the meantime, the price of the static access charge (AVC) on a 50/20 plan has been cut from $34 to $27 to match its best-selling 25/5 plan. Just 4% of users are currently on 50/20.

Retailers will also get a 50% discount on the ­connectivity virtual circuit (CVC) cost to improve its commercial appeal.

The new rates introduced next year bundle the AVC and CVC charges together and retailers will also be offered additional capacity at a 40% discount of $8 per megabit per second per month.

The NBN says the new plans include nearly double the current average capacity being purchased by retailers across fixed line services today and will reposition 50mpbs services as the company’s flagship plan.

“Combining access and bandwidth charges into one simple price point will not only promote the take-up of plans based on higher wholesale speed tiers and position the nbn™ 50 bundle as our flagship service, but it will also trigger the triple benefit of improved end user experiences, provide more affordable pricing options for retailers and support NBN Co’s revenues in the longer term,” Chief Executive Bill Morrow said.

NBN Co is also introducing a lower cost of entry-level wholesale bundle for voice-only and basic broadband with 50kbps of data, which it says is enough to cover a basic telephony service. The wholesale price of the nbn 12 plan will be $22 per month, an 8% discount on the current entry-level plan.

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