NBN Co’s plan to increase the wholesale price of its 50Mbps service would result in an additional $6.60 in monthly cost-to-serve for Vocus, a telecommunications company. Vocus’s wholesale costs for the 50Mbps service would rise from $45.40 to $52 if NBN Co was allowed to raise prices for the tier. This cost increase takes into account the $5 monthly hike in plan cost and extra connectivity virtual circuit (CVC) costs resulting from a reduction in the amount that comes with the plan.
Vocus is concerned that price increases by NBN Co may cause some customers to revert to 25Mbps services or even drop the NBN altogether. Many of Vocus’s price-sensitive customers have already downgraded their broadband plans to save $5 or $10 per month. Vocus noted a doubling in monthly downgrade requests between March and June 2022. Of the users who chose to downgrade, the majority downgraded from a $75 50Mbps plan to a $65 25Mbps plan or a $55 15Mbps plan. Close to a third downgraded from a 100Mbps plan to a 50, 25 or 15Mbps plan.
Under previous iterations of the SAU, Vocus lobbied for price reductions on 50Mbps plans and below. If the ACCC approves NBN Co’s latest revised SAU, pricing on the 50Mbps and 100Mbps tiers will converge, which is intended to persuade more of the NBN user base to upgrade to 100Mbps plans. However, this strategy is unlikely to work if customers’ lines do not support higher speeds or if customers lack the use cases or budget for that level of service.
In its submission, Vocus suggested pricing the 25Mbps tier in a way that retail pricing could come in at a more affordable $50 per month. The telco also said that CVC inclusions on 50Mbps and below tiers should keep up with customer demand for bandwidth. Vocus argued that it is not reasonable that NBN Co is only proposing to increase the CVC inclusions associated with the 25Mbps and 50Mbps speed tiers at six-month intervals at 50 percent of the usage change. Vocus said that this approach is another way of raising prices for low-speed NBN plans. To meaningfully mitigate cost uncertainty for RSPs and protect consumers, CVC inclusions must be increased in line with end-user demand, according to Vocus.