NBN Co selects 50Mbps price option unfavoured by Telstra and Optus

NBN Co is rolling the dice on a pricing option for 50Mbps and below services that neither Telstra or Optus prefers in its latest - it hopes last- redraft of price and non-price terms for the network.

The company lodged a revised special access undertaking (SAU) with the ACCC on Monday, which was released today, along with a cache of support documents, including a new three-year price plan.

The centrepiece of this version is a new ‘floor’ and ‘ceiling’ price model for 50Mbps services and below, which is intended to limit the wholesale costs to $55 a month.

NBN Co had not settled on a way to do this, however, and had offered up three different models, with varying bandwidth inclusions, excess charges and other cost structures.

To make things more difficult, the industry was divided on which of the three they “preferred”. 

In its revision, NBN Co has backed what is known as “option two”. 

Its main features are that the amount of bandwidth that comes bundled with each service rises from 2.5Mbps to 3.5Mbps, and excess bandwidth charges are reduced from “$8/Mbps to $5.50/Mbps in FY24 (reducing to no more than $4.50 and $3.50 in FY25 and FY26, respectively)”. [pdf]

This option has the backing of Aussie Broadband, Vocus, Superloop and Launtel.

Vocus said last month [pdf] the option “reduces the cost exposure to increased customer usage, as the increased customer inclusion would mean a greater proportion of our 50 Mbps services would not incur any overage [excess] costs.”

Aussie Broadband said [pdf] it “enables the greatest price-certainty” over the next three years, and “has the greatest opportunity to provide a level playing field”.

In preferencing option two in the revised SAU, the big question now is how Telstra and Optus react. Neither selected this as their preference.

Telstra, in particular, had said [pdf] option two “will be the worst solution … as it will create the biggest increase in our costs of supplying customers with connectivity.”

Optus, meanwhile, had suggested [pdf] that option two could result in mass downgrades to 12Mbps and 25Mbps tiers, which would become more profitable to sell than 50Mbps services.

iTnews has contacted both Telstra and Optus for comment.

An Optus spokesperson said the company "will be reviewing the full documentation so we can properly assess its impact both in terms of its cost impacts and service performance."

Telstra's full-year results are tomorrow, with the SAU now likely to be a key topic of discussion.

NBN Co said it settled on option two pricing because “this option had the broadest support from retail service providers and best addresses the residual [issue of] pricing certainty.”

The ACCC will publish a consultation paper for the revised variation next week, with consultation to run until September 13.

If the revision is deemed acceptable, the SAU could be active before the end of the year.

The SAU revision process is now two years in, and the strain has started to show, not least because it is eating into retailer’s margins the longer it goes.

Also included in the revision is extra money for retailers to allay some of their additional costs: a transitional credit to be split among providers, with the pool increasing from $12 million to $20 million; and an extra allowance to pay for some IT system changes to implement the new pricing structure.