news Coalition MP and former Optus executive Paul Fletcher has attacked early NBN pricing released by cut-rate ISPs Exetel and Dodo, claiming the pair’s commercial plans didn’t reflect the reality of what he said would be increased pricing on the NBN compared to today’s existing broadband options.
Exetel published its first commercial pricing for services on the NBN in late July, significantly undercutting previous prices published by rival Internode, with its cheapest option starting at $34.50 a month and the most expensive topping out at $99.50. At the time, Communications Minister Stephen Conroy seized on the plans — along with a “sub-$40” plan flagged publicly by fellow ISP Dodo — as evidence that NBN pricing would be affordable, with competition to drive lower prices.
However, on Monday in Federal Parliament this week (PDF transcript), Fletcher took aim squarely at the two ISPs, in comments first reported by the Financial Review.
“The key point I want to make is that to argue, as Senator Conroy has done, that because Internet service providers who are acknowledged to be discount operators at the discount end of the market are offering lower prices than Internode, that proves that NBN retail prices will be lower than today’s broadband prices is quite wrong,” said Fletcher. “It is a non-sequitur.”
“The reality is that Internode has a market share of nearly three percent, whereas Exetel has only about 0.9 percent market share. It is true that Dodo has a similar market share to Internode, but we have not seen any actual pricing from them yet — it has simply been ‘mooted’.”
Fletcher said he “simply made the point” that there was no evidence for claims by Conroy and Prime Minister Julia Gillard that the construction of the NBN would mean reduced prices for broadband services. “In fact, what the pricing that has been released demonstrates is that consumers can expect, at the very best, prices to flatline and in reality they are going to increase.”
The Coalition’s MP’s attack also broadened to Dodo’s customer service record. “I make the point that while there is nothing wrong with being discount operators, as Dodo and Exetel are, the Telecommunications Industry Ombudsman reports that over the period October 2010 to March 2011, 4.5 percent of its complaints concerned Dodo, although it had a market share of 2.9 percent,” he said.
Fletcher’s comments come as Shadow Communications Minister Malcolm Turnbull has recently embarked on a significant push to highlight the issue of pricing under the NBN, claiming that NBN Co’s special access undertaking will contain provisions allowing it the right to raise prices for most of its services by up to five percent per annum more than inflation for the next 30 years.
“The whole justification given by the Government for building the NBN is to provide most Australians with access to super fast broadband at 100 mbps,” Turnbull said earlier this week. “And yet it is now quite clear that the consequence of spending over $50 billion will be that speeds comparable to ADSL2 will be available at similar or somewhat higher prices, but that the super fast speeds will only be available at higher and, over time, even higher prices making access to broadband less affordable.”
Frankly, the Coalition is out on a limb here, and while neither Turnbull nor Fletcher appear to realise it, Conroy certainly does.
The fact is that the current affluence of the predominantly middle-class Australian population means that it is not really that concerned about broadband pricing. Yes, a number of Australians are attracted to cut-rate ISPs like TPG and cut-rate mobile providers such as Vodafone. That’s only natural.
But evidence of the shifting market share over the past decade points much more strongly towards an Australian preference for faster, more reliable and higher capacity telecommunications services, rather than a focus on pricing. Think about the extreme levels of growth currently seen within Telstra’s Next G mobile network, which is the best network in town and priced at the top-end. Think of the hundreds of thousands of customers currently deserting the cheapest mobile operator in town — Vodafone.
Think of the way that ISPs such as iiNet and Internode have been able to significantly grow their market share by rolling out competitive ADSL infrastructure in exchanges and providing a quality ADSL2+ service, with decent bolt-ons such as internet telephony lines. It remains true that iiNet and Internode are some of the higher-priced ISPs on the market — yet I don’t see a lot of people complaining — just like they won’t complain about pricing when they have fibre Internet rolled out to their door.
Normally, after Turnbull unveils a significant new attack on the NBN (and he is usually supported by Fletcher in doing so), the press leaps on his comments and trumpets them to the moon — and Conroy is forced to respond.
However, this week we’ve seen a different story played out. Much of the press hasn’t touched the Coalition’s NBN pricing tantrum with a bargepole — because journalists and commentators know that the issue of pricing is simply not one which causes Australian readers to lose much sleep. And Conroy has done the same. A solitary line caps off this morning’s Financial Review article on the subject: “Senator Conroy declined to comment on Mr Fletcher’s remarks.”
Because Conroy knows he simply doesn’t have to.
Image credit: Office of Malcolm Turnbull