This is why the NBN can't provide one simple 'all-you-can-eat' plan

(Michael Dodge/Getty Images for VRC)

National Broadband Network chief executive Bill Morrow said his organisation’s monetary and service obligations were stopping it from providing one simple wholesale product like in other countries.

The NBN currently charges retailers an access fee and an extra optional amount for network capacity (called CVC), which customers need to avoid congestion during peak hours. NBN’s much-reported performance problems have been blamed on retailers not buying sufficient CVC as they try to keep their own costs down to attract new customers.

The situation has been compared unfavourably to other countries such as New Zealand, where the fibre operator Chorus does not charge a CVC fee — with the basic access fee providing as much capacity as is available.

At a senate estimates hearing on Tuesday night, the NBN chief explained that the organisation had already analysed the possibility of a flat fee, “all-you-can-eat” offering — but two major stumbling blocks stopped that dream from becoming reality in the country.

1. NBN is obliged to make a profit

The NBN, recorded as an asset in the government’s books, is obliged to return dividends and profits back to the government. As such, it needs to make $52 average revenue per user (ARPU) per month to meet this obligation.

This means any “all you can eat” product would be charged to retailers at a minimum of $52 per month, which would end up being at least $75 — probably more — for consumers after the retailer’s margins were added on.

“I don’t think too many people will like the idea of a single price ‘all-you-can-eat’ component, if we have to put it at the cost recovery level, which is $52. They won’t buy it.”

Some NBN critics, such as telco entrepreneur Bevan Slattery, have argued the national network should be seen as a social contribution by the government which should not be expected to bring a direct profit back to its coffers. But such a write-off has also been a politically sensitive issue for both sides of politics, with public scrutiny on national deficits.

2. NBN is obliged to provide universal access

“We could simplify our life just by saying, you know what, let’s put one price point out there. You get as much bandwidth as you want, an all-you-can-eat model, let’s say $52 for that and go for your life,” said Morrow.

“The problem with that is it defeats the purpose NBN originally stood for — and I believe stands for today — that everybody in this nation should have broadband.”

As a government-provided network, the NBN is obliged to make its products accessible and affordable to every Australian. The concern with a flat fee $52 “all you can eat” product is that there many sections of the community that would not be able to afford the $75-100 retail price.

“For those people that can’t afford the superhigh speeds, let’s give them a speed and service that they can afford. And that’s why you have a 12Mbps product. For people that say ‘I don’t need 100Mbps and I can’t afford it anyway’, we don’t want to eliminate that,” Morrow told the senate estimates session.

Related to this altruistic motivation is a monetary one — the $52 break-even ARPU is calculated based on a 75% sign-up rate. Any lower take-up means the NBN falls short of its required returns back to the government.

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