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Transcript: NBN proposed wholesale pricing and product changes, Doorstop, Canberra

Topics: NBN Co; NBN proposed wholesale pricing and product changes

 

PAUL FLETCHER:

Well, good morning. 

I’d like to make some comments about the NBN Round 2 pricing consultation paper which has been put out by NBN today. 

I want to particularly welcome the fact that NBN has proposed new lower wholesale pricing for the entry-level bundle, the 12/1 bundle. 

The new lower wholesale pricing that NBN is proposing, means that it is good news for budget conscious households, who are now likely to have better options in terms of connecting to the NBN. 

NBN has proposed pricing for the entry-level 12/1 bundle which would allow for a $60 per month retail price with unlimited monthly data downloads.

It is very important that we have offerings on the NBN that are suitable for budget conscious households. 

In fact we estimate that there are about 500,000 budget conscious households within the NBN footprint who are not taking the service right now. 

The NBN pricing proposal contained in their Round 2 pricing consultation paper issued today will allow retail service providers to offer an entry level 12/1 product at a price of $60 per month with no monthly data download limits in the retail market; and that is likely to mean that some of the budget conscious households that to date have chosen not to take up the NBN may now have a new reason to do so. 

Of course, there’s a range of new prices across all of the speed tiers contained in the paper that NBN has put out today, and some two thirds of users on the NBN take a 50 Mbps plan or higher. But it is also important that we have offerings in terms of price for the 12/1 entry level product - 12 Mbps down, 1 Mbps up - it is important that we have offerings in terms of price of that entry level 12/1 tier which are designed to meet the needs of budget conscious households, so I welcome the fact that NBN has included in its Round 2 pricing consultation paper issued today this lower wholesale price for the 12/1 entry-level service tier. 

 

JOURNALIST:

How much will people actually save by going on this wholesale pricing plan?

 

PAUL FLETCHER:

Well the issue in particular is that we don’t have many retailers at the moment who are selling a 12/1 entry level product with unlimited monthly data; and one of the reasons is that it is very difficult for the retail service provider to make money with the current wholesale pricing. I’ll leave it to NBN and to the retail service providers to comment more specifically on these issues, but we do believe that this reduction in wholesale pricing will make it more feasible for retail service providers to offer that 12/1 product at a $60 per month price point in a way that lets them generate more profitability than has been the case to date. 

It is important to make the point that’s a price point which is roughly in line with what people may be paying who are still on the existing ADSL network; and so this will allow people to move across at broadly the same price point, of course on a network which is now available to most Australians, and with the roll out due to complete next year, and a network that is considerably more reliable than the old Telstra copper network.

 

JOURNALIST:

Is the consumer price $60 or is that the wholesale price?

 

PAUL FLETCHER:

The wholesale price has been set to allow a retail price of $60. 

 

JOURNALIST:

You ruled out the sale of Telstra, I believe. Will you rule out the sale of the NBN in this term of Government?

 

PAUL FLETCHER:

It is premature to be talking about the privatisation of NBN. When the previous Labor government established the NBN and legislated the arrangements in relation to it, they set out in the legislation a series of steps that need to occur before NBN can be privatised. In other words, Labor contemplated the privatisation of NBN but it’s premature to be talking about that now. Our focus is on completing the rollout which is due to happen next year and on maximising the economic and social benefits of the NBN. One of the important ways we do that is by making sure that there are suitable prices for budget conscious households because it’s estimated that there are about 500,000 budget conscious households within the NBN footprint who right now are not taking the NBN. If there is an entry level price in the market which better meets the needs of budget conscious households then we’re going to have a better prospect of getting some of those people onto NBN and in turn, getting more Australians experiencing the benefits of the National Broadband Network. 

 

JOURNALIST:

Are you confident that NBN Co will be able to complete all its future upgrades with the current level of Government investment or will there have to be another investment of funds from the Government?

 

PAUL FLETCHER:

The NBN issued their most recent Corporate Plan just a couple of weeks ago. That of course is predicated on the existing arrangements in relation to funding - $29.5 billion of equity from the Commonwealth invested in NBN, $19.5 billion of debt, and the capacity for NBN to go to the private debt markets for up to $2 billion. And that is the basis on which NBN has developed its most recent plan which sees the network being rollout out, the network rollout completing next year, and of course continuing upgrades to the network. It’s important to make the point that that Corporate Plan includes some $4 billion of continuing investment from 2020 to 2023 to continue to upgrade and develop the network.

 

JOURNALIST:

So is that going to be enough without need for further investment from the Government?

 

PAUL FLETCHER:

Well the Corporate Plan is predicated on the agreed investment level, and that’s a plan, carefully developed, which lays out how the rollout will be completed, how the company will arrive at being cash flow positive, and how it is going to get on with delivering broadband services across Australia. 

 

JOURNALIST:

The latest Corporate Plan pushed out to 2023 the time at which the NBN Co will break even so that’s the third delay I think, so those little details are subject to change. Should we just take them at their word?

 

PAUL FLETCHER:

The most recent Corporate Plan issued just two or three weeks ago sets out NBN’s plans over coming years within the peak funding requirements that have been agreed between the Government and NBN so there’s no change to those, and sets out a plan to get to positive free cash flow, to complete the rollout, and to continue to upgrade the network. 

 

JOURNALIST:

How much of a threat is 5G to NBN and its viability?

 

PAUL FLETCHER:

5G is a very significant development in mobile telecommunications but it is unlikely to present a significant threat to the NBN business plan. The NBN business plan assumes about 75% of households will take up the NBN so there’s already an assumption that some households will not take up the NBN for a range of reasons and that can potentially include 5G. It’s important to understand the amount of data that households are consuming is going up very dramatically. In June this year on the NBN, the average user downloaded 255GB a month. Just nine years ago on fixed line networks that number was 11GB a month. We’ve gone from 11 to 255 a month. With that continued growth in data demand, a fixed line network like the NBN is always going to have an advantage in delivering efficient and economic prices at a proposition that is attractive to customers. That capacity to download huge amounts of data people are already consuming and they’ll likely increase.

 

JOURNALIST:

How many more households are you expecting to sign up to the NBN under this new pricing?

 

PAUL FLETCHER:

Well, we believe there is about 500,000 budget conscious households within the existing NBN footprint who right now are not taking the NBN because they don’t think it represents value for money for what they want to do. If we can have more retail service providers offering a $60 a month retail priced plan with no monthly data download limit. We think that here’s a prospect of getting some of those 500,000 households to come onto the NBN. I’ll leave it to NBN and the retail service providers to make the precise predictions but it stands to reason that if you’ve got more attractive pricing with that unlimited data, no monthly data download limit, if we can have more retailers in the market offering that plan, I think we’ve got a good chance of getting some of those people to come across to the NBN. 

 

JOURNALIST:

How soon do you think retailers will take up the $60 a month plan?

 

PAUL FLETCHER:

Well NBN in the paper they’ve released today have indicated they’ll have this wholesale pricing in the market in October so quite quickly, and I would anticipate that there will be a number of retail service providers who will be looking at this very carefully and will be interested in whether they can bring a product to market. 

 

JOURNALIST:

But you don’t know when retailers are actually going to get on board?

 

PAUL FLETCHER:

Well that will be a matter ultimately for the retail service providers but the key point is what is within NBN Co’s control is how quickly that new lower wholesale price is in the market. NBN Co is saying they can have it in place from October. 

 

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