NBN Co chief executive Mike Quigley today said his team had opened discussions with Simon Hackett over the Internode managing director’s NBN pricing concerns, but stopped short of saying NBN Co would be able to address what Hackett has previously described as the company’s “insane” pricing model.
The debate about NBN Co’s pricing model as a whole was kicked off in late March when Hackett gave a landmark speech describing the model as “insane” for small internet service providers, warning that none would survive their walk through the “valley of death” transition from the current copper network to the fibre future envisioned by the Federal Government.
Over the succeeding weeks, NBN Co made a number of public attempts to further explain its pricing model, going into great detail about why it had chosen the specific mix, as well as publishing an online calculator that allows users to calculate projected wholesale costs for providing services to its planned network.
However, Hackett also fired back several times at what he saw as “crystal ball gazing” by the company. In a hearing this morning in Sydney of the Federal Parliament’s NBN committee, independent Senator Nick Xenophon noted Hackett had gotten “pretty fired up” over the issue.
Quigley replied that NBN Co had, subsequent to the war of words, had “ongoing discussions with Mr Hackett and his team about their concerns”. “We will be working through this with Mr Hackett and his team,” he said.
The NBN Co chief noted his company’s pricing model was a balance. The model constitutes a mix between the basic per user charge for connecting end user customers to NBN Co’s network (the ‘Access Virtual Circuit’), as well as a charge based on data usage (the ‘Connectivity Virtual Circuit’). Hackett has argued for the balance between the two ‘$x and $y’ charges to be changed, with the CVC pricing to come down and the AVC pricing to rise.
Quigley said the tranche of smaller operators envisaged under the NBN tended to focus on smaller geographical locations, rather than trying to cover the entirety of Australia. “Their investments will be much more modest,” he said, as a consequence.
In addition, Quigley noted that some aspects of NBN Co’s pricing model were driven by the Australian Competition and Consumer Commission’s decision to set the numbers of points where ISPs will be able to interconnect with the NBN fibre at 121 nationally — rather than 14 as NBN Co itself had favoured. Hackett believes the pricing model advantages large players with existing infrastructure such as Telstra and Optus.
“That’s not our decision — it’s an ACCC decision,” said Quigley.
However, the NBN Co chief rejected comments quoted by Xenophon from NEXTDC chief Bevan Slattery that the CVC pricing model would bring down the NBN. “That’s not what we’re hearing from customers who we’ve done deep dives with,” said Quigley.
In addition, he noted that ISPs themselves would have to have some skin in the game. “It’s also clear that we tested this with quite a number of [retail service providers],” Quigley said. “Would they like our prices to be lower? Of course.”
“At some point an RSP has to make an investment.”
Image credit: NBN Co