NBN Co, the Australian company responsible for the National Broadband Network, has made adjustments to its pricing structure for the 50Mbps speed tier. The company’s new proposal sets a “floor” wholesale price of $50 and a “ceiling” wholesale price of $55 for heavy users in the 50Mbps tier, based on their usage profile. These prices will be applicable only for the fiscal year 2024 and will increase annually thereafter.
Under the revised pricing, heavy users in the 50Mbps tier would cost the same to serve as 100Mbps users, eliminating the possibility of excessive bandwidth bills. This change aims to encourage users who require more bandwidth to upgrade to higher speed tiers. Retail internet providers will need to manage the mix of users in the 50Mbps tier to ensure there is a price difference between the 50Mbps and 100Mbps offers. If too many heavy users are present in the 50Mbps tier, it would result in similar wholesale costs for both tiers.
NBN Co argues that this adjustment incentivizes rather than forces users to upgrade. With heavy 50Mbps users costing the same as 100Mbps users to serve, providers have a greater incentive to persuade such users to upgrade, either by upselling them to a higher-priced plan or by migrating them to the 100Mbps tier without an additional charge. However, convincing customers to pay the higher retail cost and ensuring their infrastructure supports 100Mbps speeds may present challenges.
The proposed pricing changes would eliminate the need for complex bandwidth pooling arrangements currently employed by retail providers to balance the cost of supporting users in the 50Mbps tier and below. The new model removes the concept of pooling and offers cost certainty for providers, as they would know that serving a 50Mbps customer will fall within the $50 to $55 wholesale price range per month for FY24, with subsequent yearly increases.
NBN Co claims that the proposed pricing structure would not have a direct impact on providers’ systems but suggests that some providers might choose to implement supporting functions and systems for internal reconciliation purposes. The company acknowledges that the floor and ceiling proposal represents a significant departure from the current approach and will have varying effects on providers depending on their speed-tier mix and customer usage distribution.
NBN Co emphasizes that the new proposal is revenue-neutral, meaning it will not negatively impact the company’s earnings. Given that the 50Mbps tier is the most popular product, NBN Co expects to recoup a significant portion of its costs by FY26 through this tier. The company hopes that these pricing adjustments will facilitate the acceptance of a revised special access undertaking (SAU), which defines the terms and prices for network access until 2040. The previous rejection of the revised SAU was partly attributed to concerns about the pricing of the 50Mbps tier.
