If you want high-speed internet, you have to pay more

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Updated

August 18, 2017 19:22:40

Hobart resident Fraz Wilde is one of many Australians who signed up for the National Broadband Network (NBN), only to be disappointed.

Key points:

  • Telcos signing customers up to poorly suited internet plans, NBN boss says
  • Surveys show premium services are priced around $100 a month — much more than customers are willing to pay
  • Many telcos not buying enough bandwidth, leaving customers jammed at peak times

“It could be anywhere from five to 15 seconds, the internet will stop. I won’t be connected to the internet, or there’ll be slight buffering,” he lamented.

Mr Wilde thought buffering and drop outs would become a thing of the past when he abandoned his old-fashioned ADSL internet connection to switch to the NBN.

What he’s discovered is that it is “buyer beware”.

“Perhaps I didn’t investigate as well as I should have on the type of plan that would be required for our household,” Mr Wilde added.

Retailers at fault for customer disappointment: NBN boss

NBN boss, Bill Morrow, has a different take.

He puts the blame for the poor experience of people like Mr Wilde squarely on the 100 telcos who are signing people up to the network.

“The combination of so much inventory coming onto the market at one time and the fact that there’s so many retailers, you get into this heavily aggressive price war phenomena because of the land grab we currently see.”

Mr Morrow says this means thousands of people are being sold the cheapest internet, rather than the internet they need to meet their requirements.

“Average consumer expectation is, ‘OK, it’s finally in my neighbourhood, I want to migrate over, I want the price the same, but I expect so much more’. And then you are disappointed because the retailer has just mapped you over at parity with what you had,” he explained.

The vicious cycle: Retailers, NBN and government

On the other side of the coin, telcos are caught in a pincer movement.

The NBN is costing around $50 billion to build, and the Government wants it to pay for itself.

That means it has to charge high prices to the telcos like Telstra, Optus, iiNet, Vodafone and TPG.

They then slug the public with prices of around $100 a month for a premium service, but surveys show only about 20 per cent of the population is prepared to pay that.

“I would probably pay about $40 to $50 per month for unlimited access,” Mr Wilde said, echoing the survey’s findings.

Making life even harder for the telcos is that the NBN has a two-stage charging process.

There’s a fixed access charge based on the speed of internet the telcos buy.

Then there’s a variable charge based on how much bandwidth telco customers actually use.

That leaves the telcos not knowing what they have to pay the NBN.

For example, for two people on the same monthly plan their telco will pay much more to the NBN for the customer streaming videos than the person who just browses the internet.

“We are absorbing higher and higher costs associated with the provision of those plans,” Telstra CEO Andy Penn said.

Traffic jam on the ‘information superhighway’

To protect their profits, many telcos are not buying enough bandwidth and keeping their fingers crossed that all their customers won’t be on the web at peak times.

“What they normally would divide between 100 people, now they divide it between 1,000 people, so the quality of the service is then going down,” independent telecommunications consultant Paul Budde explained.

A simple analogy is a motorway.

In off peak times, you can drive fast.

But in peak hour, unless there are more lanes, or bandwidth, the motorway can’t cope, and you get a traffic jam.

“They know that the market situation is such that if you sell higher speeds at costs that are unaffordable, the market is simply not going to buy it,” Paul Budde said.

The super-fast policy promise is only for the minority

The Rudd government promised a super-fast national broadband network connecting 90 per cent of Australians with up to 100 megabits per second.

Fast forward nearly a decade, the NBN’s Bill Morrow expects only one out of five consumers are prepared to pay for that.

“The fundamental premise behind this viable commercial business model is that people that want more than what they had before on ADSL services will have to pay more,” Mr Morrow said.

Which might be true, but for people like Mr Wilde, the super-fast internet highway has hit a speed bump.

“I think that maybe I just bought the most affordable NBN and it wasn’t that greatly different to what I was experiencing on ADSL,” he said.

The NBN offers much more than we have been used to, with speeds of up to 100mps.

The mistake we have made it seems is to think we can get it for the price we are used to.

This story is on The Business — tonight at 8:30pm (AEST) on the ABC News channel and ABC iview.

Topics:

company-news,

telecommunications,

information-and-communication,

internet-technology,

australia

First posted

August 18, 2017 19:17:09



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