news MyNetFone has demanded that the NBN “level the playing field” for mid-size telcos in Australia by taking several measures it said would bring healthier competition in the telecoms industry.
The provider of hosted voice and data communications services suggested this could be brought about by reducing the required 121 points of interconnect (POIs) required to directly connect to the NBN, removing “outdated” connectivity virtual circuit (CVC) usage-based pricing and writing off part of the network’s build cost.
Speaking at the 2016 Tech Leaders conference over the weekend, MyNetFone CEO and co-founder Rene Sugo explained his belief that the NBN business model is under threat due to a combination of “unfeasible” wholesale pricing and the risk posed by the “NBN bypass” options from the big telco providers.
“The NBN wholesale pricing model business case is currently usage-based and relies on reaching a certain percentage of service activations to generate sufficient revenue to repay the investment of building the network,” said Sugo in a statement.
“In order to reach this activation target, NBN has to be the ‘number one choice’ for data services for consumers, and be available at a viable price point for service providers of all sizes to resell – and as it stands this is not going to be realistic.” he said.
Sugo suggested that the NBN faces a “serious two-fold challenge”.
Firstly, the four major telecommunications providers offer their own data access services that are essentially an “NBN bypass”.
“The current NBN model with its 121 POIs and CVC charges distinctly favours the top end of the telco industry, however the big telcos have more attractive bypass alternatives to sell to their consumers. This NBN bypass will eat away at the NBN market share, posing a major barrier to reaching activation and revenue targets,” said Sugo.
In a statement, MyNetFone said this means the mid-size telcos will have to fight an “uphill battle” to offer competitively priced NBN services.
“The promised ‘level playing field’ is nothing more than a mirage,” said Sugo. “With the untenable 121 POIs, direct NBN interconnect is out of reach to most and they are already forced to resell NBN via the big providers, putting further squeeze on the slim margins.”
The firm suggested that CVC costs also favour large providers, while mid-size providers need a higher margin of CVC headroom to ensure reasonable contention. This translates into higher cost per user, MyNetFone said.
Sugo said that the mid-size telcos could be in danger of having too low margins and too few customers to be viable.
The second challenge, MyNetFone said, is that NBN revenue is based on user numbers and tied to reaching an “unrealistic” target of 80% of all Australian households by 2020 – a figure over 100% of the fixed broadband market, it added.
“Any shortfalls in activation numbers and resulting revenue will need to be recouped via increased usage CVC and per port costs, leading to a squeeze in margins and an increase in retail prices as wholesale costs go up>’ said the company.
It further suggested that this will make the NBN “unattractive” for both providers to sell and for consumers to buy.
“Instead big telcos will focus on pushing NBN bypass services like 4/5G and FTTB – we may well see mobile broadband become cheaper than home connections!”
MyNetFone recommended that the NBN should level the playing field for the “second-tier players” in the industry by reducing the required number of POIs and removing CVC usage-based costs, since these “no longer reflect consumer usage patterns” and would allow healthy and effective market competition.
Additionally, the firm said, “the government needs to consider writing off part of the NBN network build cost, to ensure NBN retail pricing does not snowball out of control”.
Image credit: NBN company