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NBN Wholesale Pricing Structure: Problems and Solutions

Wednesday, March 30th, 2011 by

At the CommsDay Summit in Sydney on 29th March 2011, I delivered a talk describing my analysis of the current NBN Wholesale Pricing Structure.

That analysis showed how the current pricing structure and its environment contains serious challenges such that it will be economically impossible for any National Retail Service Provider to viably sustain being a direct customer of NBNCo if they have less than around 250,000 customers.

These challenges stem from (a) the ACCC’s decision to force NBNCo to locate its points of interconnect at great distances from its own wholesale customers and (b) The NBNCo’s decision to model its pricing structure on the ‘scarcity’ based pricing model of Telstra Wholesale, rather than upon the ‘abundance’ based pricing model that is appropriate for a new national dark fibre based network.

If this is not addressed, the likely result will be a maximum of only around Five National Retail Service Providers directly connected to the NBN  (plus some regional/state based providers, who may be able to make the numbers work within their region but won’t be able to grow outside of it).

My thesis is that services innovation and long term consumer benefit through the NBN is far better achieved if it is possible for smaller companies to be direct customers of the NBN if they wish to do so. It should be possible for a small new entrant to start a new Service Provider business and grow to becoming a large national player via organic growth over a decade or so (just as Internode did in the ADSL marketplace).

I also presented the simple solutions that (if implemented) would address these problems and allow a path for a new entrant to grow from zero to becoming a new national service provider, instead of being shut out of doing so directly and being forced to buy services from a wholesale aggregator such as Testra Wholesale or Optus Wholesale. Using an aggregator will be an appropriate choice for some entrants, of course, but ideally that would be an alternative to direct access, not the only path.

The slides from my presentation are available to download as a PDF file here:

NBN Wholesale Pricing Structure Challenges – CommsDay Presentation

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