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.


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


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??