NBN at $200/ month? Maybe

April 11, 2009 — 6 Comments

I wrote earlier in the week about how the numbers don’t stack up for the NBN when you consider the need to repay the cost of the rollout. The key presumption in that post was that the NBN had to be offered at a competitive rate to encourage uptake, but that competitive rate would never cover costs.

But what if it simply can’t be offered at a competitive rate to cover costs?

$200/ month is the figure from AAPT: News.com.au

Paul Broad, chief executive of Australia’s third largest telco, AAPT, is convinced broadband bills will rocket to at least $200 a month under the Government’s plan and says consumers simply won’t pay.

The Opposition put the figure at $150 earlier in the week, and noted rightly that the profit would have to be bigger than Telstra’s to cover costs (news again)

Opposition Leader Malcolm Turnbull questioned the commercial viability of the project suggesting it would need an annual return of $6 billion, The Advertiser reports.

“Now that is substantially more than Telstra’s entire profit,” he said.

“If as the industry analysts say, if this would require households who are currently paying say between $40 and $50 a month for broadband, to pay $150 a month for broadband, where is the evidence households will do that?” he asked.

I’ve got no problems with the maths in either, but I have serious doubts on the marketing logic: there’s no way in the world the NBN is going to ask $200 a month for access.

Zero. Zip. Zilch.

Take the economics out and it’s a pure political decision. Conroy and Rudd might be dumb, but they’re not dumb.

But here’s the other consideration: the NBN is a WHOLESALE network. We’re talking access to retail costs really, not wholesale costs. Image $200/ mth wholesale access + the retail margin on top.

Not happening.

Which leaves us with a black hole, because it has to bring in this sort of money to recoup its costs, let alone make a profit.

However.

There is one scenario that might make it work. Not at $200. Maybe not at $150. But it could work at $100-$150.

Bundling.

Triple play phone, data and tv.

Gizmodo Australia found only 20% of people would pay over $100 for NBN access…but for internet access.

If say Optus or iiNet offered unlimited calls, cable TV and high speed internet for say $150/ month, people might pay.

But that consideration is made on today’s competitive environment.

2018 on the other hand??

6 responses to NBN at $200/ month? Maybe

  1. Yep, no chance at $200 per month.

    It would be nice if the Government was upfront and honest about the fact that costs will most probably not be recouped. I think the general public, with the exception of yourself and the other small-Gov types, wouldn't really mind — they understand that this sort of project couldn't be built by a commercial enterprise because it is too expensive.

    But does that mean it shouldn't be built? Should the Government only ever do stuff that is profitable? Should every road be a tollway? Every park have an entry fee? Or should the Government invest in infrastructure that will dramatically increase the opportunities that are available too many people and businesses.

    The infrastructure might not be profitable, but the startups that will be able to flourish because of the infrastructures existence will certainly be profitable and create many jobs.

    I would have thought that someone as technologically orientated as yourself would see the massive benefits and possibilities of having this sort of infrastructure in place.

    Yes, it will cost a lot of money — but so what? If there's another way, please let us know…

  2. I would pay $200 a month if there was a significantly high download limit, something in the vicinity of 200gb (download only).

    Currently I pay $50 a month for 30gb data with Optus, I have an Optus home phone, and we have Foxtel full package (non-HD).

    With that high a download I would be able to ditch Foxtel (save $110 / month) in favour of iTunes, Hulu / Boxee, etc. as most of what I watch is either available online now as either a stream or through iTunes.

    I would also be able to completely lose the home phone in favour of Skype ($30 / month).

    Granted there are costs associated with iTunes and Skype, and not everyone knows how to access Hulu / Boxee outside of Australia, but with the push to have so much more content available online and being able to stream it, I can see it getting pretty close to my current monthly spend.

  3. Actually, in this household (4 adults – 5 PC's) we have 2 foxtel boxes (one an IQ) and we pay $124 per month. We have thee Internet connections costing a total of 49.95, 29.95 and 29.95 per month.
    The two boys (18 and 22) regularly get DVDs from Blockbuster About $30 per month.
    We live in the western suburbs of Sydney and would be considered an average income family.

    Without Phone service, we expend $264 per month for data and entertainment alone. I dont see $200 per month CPI indexed over eight years as being outside of the norm.

  4. Actually, in this household (4 adults – 5 PC's) we have 2 foxtel boxes (one an IQ) and we pay $124 per month. We have thee Internet connections costing a total of 49.95, 29.95 and 29.95 per month.
    The two boys (18 and 22) regularly get DVDs from Blockbuster About $30 per month.
    We live in the western suburbs of Sydney and would be considered an average income family.

    Without Phone service, we expend $264 per month for data and entertainment alone. I dont see $200 per month CPI indexed over eight years as being outside of the norm.

  5. Actually, in this household (4 adults – 5 PC's) we have 2 foxtel boxes (one an IQ) and we pay $124 per month. We have thee Internet connections costing a total of 49.95, 29.95 and 29.95 per month.
    The two boys (18 and 22) regularly get DVDs from Blockbuster About $30 per month.
    We live in the western suburbs of Sydney and would be considered an average income family.

    Without Phone service, we expend $264 per month for data and entertainment alone. I dont see $200 per month CPI indexed over eight years as being outside of the norm.

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