opinion The proposed National Broadband Network prices released this week by iiNet are simply way too expensive for the promised 100Mbps speeds and will need to be reduced significantly to drive customer uptake.
That’s the opinion I formed after a two second glance at the company’s forward pricing estimates. When you dig into the details, it only gets uglier.
The ISP is so far the only company to release any forward pricing estimates for monthly access to the NBN in the first locations to receive the new fibre services — a number of locations in Tasmania. The services are slated to go on sale from July.
And what has been released so far is not good.
It looks like iiNet is not pricing NBN services at a similar level to its current ADSL2+ broadband plans. Instead, iiNet chief regulatory officer Steve Dalby told iTnews, the company plans to offer plans similar to those sold to customers in existing greenfield fibre compounds like the Alamanda Estate in Point Cook, Victoria. Computerworld also has information on the plans.
This means customers will be paying a minimum of $49.95 for a tiny total 10GB (5GB of off- and on-peak data) for a fibre broadband service that runs at 25Mbps. I anticipate many of the NBN customers will take up iiNet’s additional $9.95 per month for an internet telephony connection for a total of $59.90 per month. Further information on Exetel’s forum here.
That price is the same amount iiNet currently charges for an ADSL2+ broadband plan with internet telephony and 16GB of total data (8GB of off- and on-peak data), meaning that low-end customers will likely get an overall better service (if with a lesser download quota) for about the same price.
But it’s still not quite as good as other large ISPs are offering. Netspace offers a 40GB limit for $49.95 (with no phone included), and Exetel charges $65 a month for an old-style, more reliable PSTN telephone line, with 24GB of data included.
Some may contend that internet telephony connections are as reliable as the old PSTN ones, but as someone who uses both iiNet’s internet telephony offering and Skype full-time, I can assure you that are not. The experience on NBN fibre connections is yet to be determined.
However, the real kicker for potential NBN customers comes when you look at the higher speed plans.
When Communications Minister Stephen Conroy and Prime Minister Kevin Rudd announced the NBN plans in April last year, they promised 100Mbps speeds to 90 percent of the population. Well, iiNet will deliver — but you’ll have to mortgage your house to afford it — the ISP will charge $129.95 per month for a 100Mbps service with a total of 120GB of included data.
Even early technology early adopters such as myself who download a lot of data and use the internet constantly for work purposes would find it hard to justify virtually doubling our monthly broadband cost simply to get higher speeds and better latency.
Most of my friends currently pay around between $50 and $70 a month for broadband — I’m on a $79.95 plan, which is $50 a month less than iiNet’s lowest proposed 100Mbps NBN fibre plan. And I haven’t been using most of my download limit as the ISP recently increased its quotas — I could probably even slip down to iiNet’s current $69.95 plan with no worries.
Again, if you look at comparable ADSL2+ plans, one of Australia’s largest ISPs, TPG, offers a $89.99 monthly plan with 150Gb of included data — a cost far less than the proposed NBN plans and ad speeds most users are relatively happy with today.
Of course, some of this criticism may be baseless. Several Taswegians have pointed out the involvement of network builder Opticomm in the Tasmanian NBN buildout process as one factor behind some of the potential pricing.
Opticomm built the Alamanda Estate fibre and is believed to be providing wholesale services at the estate. Consequently there is speculation that some of iiNet’s pricing may reflect Opticomm’s wholesale prices rather than long-term NBN pricing.
One other factor to consider is that so far, only three ISPs — iiNet, Primus and Internode — have confirmed plans to offer NBN services to the early stage rollout communities in Tasmania.
When contacted this week, other ISPs like Telstra, Optus and Exetel all said they would wait until they saw the full details of the NBN Company’s wholesale offering. Both Telstra and Optus are currently in discussions with the company. The entrance of such large players into the market may change things dramatically.
However, at least initially, the release of iiNet’s plans is enough to raise the hoary old spectre that has been hanging around the NBN plans forever — namely, will the whole shebang be too expensive to run at any sustainable rate?
What do you think about the NBN pricing revealed so far? Would you pay $129.95 per month for a 100Mbps fibre connection?
Image credit: Leonardini, royalty free
I don’t know – it seems reasonable when compared to iiNet’s existing pricing structure. I may be mis-reading, but it sounds like you expect 25Mbs to be priced around the same point as ADSL2. With the exchange in my street I still only manage 14Mbs (with iiNet), so it’s a significant speed increase.
iiNet aren’t the cheapest ISP out there – but they are one of the most highly regarded. Comparing their pricing to TPG and Netspace (both of which have average reputations at best) seems a but pointless.
The lower-end pricing is relatively reasonable, Ben, but if you look at the 100Mbps plans (which is what the Government promised), it is excessive.
Rudd + Conroy never promised to deliver ADSL2+ equivalent speeds — they promised 100Mbps. At these prices, I don’t know a lot of people that will want to migrate to 100Mbps speeds from ADSL2+.
I would be extremely happy to sign up for a 25Mbps fibre service at ADSL2+ pricing, or even pay more for 50Mps. But the point needs to be raised that the 100Mbps pricing will put it out of most people’s reach.
Using Opticomm is a case of political expediency in my opinion, so the arm flapping is somewhat unwarranted in the short term.
Does it really matter for stage 1 if people can’t initially afford 100Mbps? The 25Mbps plans represent a significant improvement in quality of connection, speed, and price than what most Tasmanians in these regional areas are used to. I would expect that, once the entire NBN operation comes on line, the massive economies of scale it will embody will drive down the cost of connection to the customer.
In fairness, to Rudd and Conroy, I don’t think the promise was that we would get 100Mbps for a song, just that we would get a network capable of supporting 100Mbps connections, which it clearly does. You would have to live in a world of unicorns and rainbows if you thought that this was going to be any cheaper than existing broadband and particularly existing FTTH plans on day one.
Finally, bear in mind that the cost to the ISP to deliver 50Gb at 25Mbps vs 50Gb at 100Mbps is not the same, it requires different dimensioning of the backhaul links, unless they’re willing to push up contention ratios and starve their customers of bandwidth they think they’ve paid for.
Even if the NBN sells a 25Mbps “tail” at the same price as a 100Mbps “tail”, there is still going to be additional costs incurred by ISPs to service those customers with higher speed connections. In practice,
I think you’ll find that the base cost for delivering NBN services is no different than the base cost to deliver ADSL over Telstra Wholesale gear and the bulk of the cost is around the backhaul costs the ISP incur.
Since when do journalists need to take “political expediency” (or any expediency at all) into account when holding politicians to account for their promises? ;)
I have to say, I pretty much agree with all of this post, Warren. You’re right, there has to be a degree of realism here.
But simply taking the greenfields pricing and applying it to the NBN scenario, which is clearly a whole new ball game, is a bit rich, isn’t it? I mean what reaction do iiNet and the NBN guys expect consumers to have when they simply rollout a 100Mbps for $130 a month? The reaction is predictable and legitimate.
What they should have done is realise that only a very small percentage of users will ever fully utilise the 100Mbps speeds on day one or ever, and priced it below $100 to drive adoption. As it stands, they’ve just thrown dirt on their own faces by not doing a bit of deep thinking about the situation.
The Government is throwing billions at this one. Re-badging greenfields fibre pricing is not good enough.
Well, you could argue that greenfields pricing a la Opticomm represents the cheapest FTTH pricing around. I suspect the reality is that Tas NBNCo seems pretty much non-existent, maybe a few execs, and a bunch of contractor companies, eg Aurora, Opticomm, etc.
Stage 1 is not about setting any price expectations, measuring takeup, learning how customers will use it or anything like that. It’s simply a political point to be made before the election is called. It looks like they’re just taking the shortest path to that point by leveraging existing business relationships between Opticomm and the ISPs
At the risk of being accused of sophistry, can you show anywhere during the NBN announcement where they said that the default and only speed we would get was 100Mbps?
Fair enough some may have gained the impression that the network was only going to support 100Mbps access, but the reality is they have indeed started delivering a wholesale FTTH network that will provide 100Mbps access to the end user.
Whether they choose to pay the price for such access is between them and the ISP.
In addition to a network capable of delivering this though, we also get a network capable of delivering gigabit point-to-point connections for business, of delivering Pay TV, and other IP stream services.
I figure if the wholesale cost for access is working out the same as the cost for DSLAM access via Telstra, then it’s really no fault of the NBN that the plans are unaffordable. It’s the cost of delivering the data itself, which falls to the ISPs, and as always is limited by the cost of international connectivity.
I pay just a tad over $100/mo for 50GB traffic on SOHO ADSL2+ with Internode — the price reflects that I’m stuck on Telstra infrastructure at this exchange. I could pay less for more traffic, but I’d have to choose a crappy ISP. iiNet and Internode are worth the (slight) premium.
… so the $129.95/mo for 120GB @ 100mbps pricing doesn’t sound too bad, particularly if it’s with a sane ISP and includes telephony.
Hmm I take your point Jeff. But it’s still a 33 percent markup on an already poor situation. For someone like me who is in a CBD area and has multiple DSLAMs in the exchange, $130 is a bit rich. And I’m an early adopter, as I said. Families just won’t wear it.
The lower-end pricing is OK-ish, but it’s still only comparable to ADSL2+, admittedly for a much better technology. If they want people to migrate they’re going to have to really convince them about the latency and reliability benefits … which people don’t really understand.
Yup, there are quite a few issues here which need to be discussed.
I think you’ll find the early adopters will come from SMB and SOHO areas. They’ll be replacing SHDSL and ADSL2+ for something more reliable and lower latency. The pricing seems to be reasonable for what you’ll get.
Volume will bring economies of scale. The more price sensitive end of the home market will bide their time till then.
+1 to this comment, as a small business owner myself I completely agree with this.
I think it’s really the data limits that are the problem. My understanding is that Tasmanian transits costs are high compared to the rest of Australia because of limited (and/or expensive) bandwidth to the mainland.
If those prices included say 50% more data then personally I’d say they looked really good. I don’t think it’s unreasonable to expect that kind of change to occur (maybe in the form of peak/offpeak usage or something)
Wasn’t that what they were going to fix with Basslink? Seems like the hype around that died awfully quick.
It’s fixed insofar as there is plenty of non-Telstra capacity there to meet future demand. I believe the DWDM they’re using may even support 40Gb per wavelength.
But at the end of the day, ISPs are not going to go all in with Basslink and not retain at least some redundant path to the big island :)
Apparently Telstra reduced their prices quite dramatically when Basslink hit “go” as well ;)
Pete, the capacity is there, unlit, in Basslink. At the end of the day though, someone is going to have to pay for it. We’re looking at a race to the bottom coming up for the ISPs and the backhaul providers.
I expect ISPs will soon differentiate themselves more on the content they can offer, either original, or unmetered, eg iView, iTunes, etc.
The kickers for me are unmetered stuff. I’m currently happily a Tasmanian on Internode, so can’t speak about other ISPs. However, with my iView, games.on.net, Majorgeeks, Sourceforge and a couple of other OSS mirrors I find it tricky now to break my monthly 50GB limit. It costs me $50 per month for this service.
On a 120GB limit … gee, can’t really see that paying more than two times current would really be worth it for the 100mpbs. Are there services in Australia for downloading movies legitimately? Will they capable of pushing data across Bass Strait to thousands of users at 100mbps? Really starting to get in to nuts and bolts. If I had a bunch of friends around the state I wanted to share data with, it may be attractive. But for e-commerce applications where we’re limited by pipe sizes to the Big Island… ergh. I’ll really need to start thinking about this a lot more.
I agree with you about unmetered content, a lot of my downloads on iiNet is stuff from their freezone — especially on Xbox Live and so on. I will be quite interested in their IPTV offering when it comes out. There should be STACKS of capacity on Basslink atm, I would find it hard to believe they are using much of it atm.
That said, we don’t have any third-party movie or TV streaming services in Australia that are really that good yet, so it will be interesting to see what happens when that ramps up.
I agree with Jeff and Ben – I think the premium would be worth it – especially since our distance from the exchange means our ADSL2+ tops out at 7 Mb/s down.
Well I’m with aaNet paying $80 per month for 120Gb (uploads only counted if bigger than downlads) ADSL2 and getting just under 9mbps plus my phone line rental of $30. So I’m pay $110 per month for my internet access. My legit internet usage ranges from as low as 50Gb right up to the 120Gb per month, it just depends on what games I buy from Steam or what I end up looking up etc etc.
If what was offered from an ISP offering NBN was something comparable to to what I’m paying now I’d jump. As the speed I’d be getting would be a guaranteed speed and not some theoretical variable speed that adsl offers. But I’d have to be going to a plan that had free zones for what I use or the same kinda dload limit for the same price. (not including phone line rental as I’d scrap that as soon as I went to the NBN, naked adsl2 isn’t offered in my area)
It seems to me that we are not able to move away from the access, speeds and data discussion. Access is king..so say the engineers. If our discussions cannot become more creative, than we have replaced our existing broadband reality with a faster network and we will continue to talk about speeds, bandwidth etc instead of IPTV, Education, health and customer enablement. For those that may have forgotten the vision, let me remind you that the NBN is about convergence and applications to base our digital future and economic growth on.
After the totally misrepresentation of ADSL2+ promising fast speeds and all that jazz—and all the ISPs do it, in actuality your lucky if you live within 2K of your exchange to get reasonable speeds. Where I live, our small exchange is heavily overloaded and becomes very congested during the day. Starts off well early in the morning but then decays to just above the promised 1.5m downstream speeds on some days. I just hope that the NBN 100m speeds don’t also reflect that situation especially at the current estimated high pricing. Hopeful that the ISPs using the NBN network will introduce plans at lower costs so as to get more users connected initially!
I hate to say this, but this NBN isn’t about prices this week or even in a years time. It’s about having a communications system for the next 50 years that isn’t limited to copper wires from 75 years ago.
Go back 5 years and do a comparison between what you got for your money and what you get today. In 5 years time, how are you going to get more bandwidth and more speed for the same money when the bottleneck is buried in your street (copper)?
People can be so short-sighted on these things.
hey Kyle, you say short-sighted, I say in Japan (where they do have plenty of fibre and have done for years) there are still plenty of people using copper because it’s a lower cost, good enough broadband service and you don’t pay high costs for fibre. Cost matters.
Don’t know what the fuss is about – The NBN will not increase uptake, it will only offer an alternate plan rate – for those of us that have to rely on an overpriced Telstra wireless network, will still have the same choice – Telstra. Why rollout a multi billion dollar network to a population that already has choice.
It’s probably expensive because of the limited backhaul out of Tasmania. Have you ever read the fine print to those Optus adds lately, i.e. Not available in Tasmania or the Northern Territory. So until the NBN has created some extra backhaul capacity, prices will always be expensive in certain places.
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