Optus, TPG stop servicing 50Mbps customers with higher plans

A new NBN price model approved late last year drove a mass behind-the-scenes shift in how TPG Telecom and Optus serve users of the popular 50Mbps tier.

The new price structure ended a scheme introduced in 2019 that let retail service providers put all the bandwidth that came with users’ plans into a national pool, and then re-allocate it based on dynamic consumption needs.

National pooling of bandwidth meant that the bandwidth inclusions on higher-speed plans - if not exhausted by those users - could be re-allocated to offset heavier users on lower-speed plans that did not come with as much bandwidth out-of-the-box.

But, as iTnews revealed in 2022, the complex structure also drove innovative behaviours at certain retail service providers (RSPs), notably TPG Telecom.

iTnews showed how TPG Telecom moved 300,000 customers back-and-forth between the 50Mbps and 100Mbps tiers.

iTnews theorised at the time that these were customers that had bought 50Mbps services; TPG continued to provide them with 50Mbps services but, through price modelling, had worked out it was more commercially viable to buy 100Mbps plans from NBN Co to serve those users’ needs.

With that arrangement now ended, numbers published by the ACCC yesterday showed mass movements of customers away from 100Mbps to 50Mbps.

Again, these movements are indicative of behind-the-scenes changes in how these services were managed, rather than any change in speed preferences by users.

As noted by the ACCC, “Under the previous wholesale cost structure, some retailers found bandwidth savings and overall cost benefits in purchasing 100 Mbps wholesale services to supply 50 Mbps at the retail level.

“The breakdown of wholesale speeds shows TPG and Optus saw the most change between the 50Mbps and 100Mbps tiers.”

“Combined, they purchased 730,000 more wholesale services at the 50Mbps tier, and 780,000 fewer services at the 100Mbps tier. 

“The change in wholesale speed tiers is unlikely to reflect an actual shift in household preferences from 100Mbps services to 50Mbps. 

“Rather, it is more likely that NBN Co’s wholesale price changes have led to the 50Mbps wholesale tier being more cost-effective for supplying 50Mbps retail services.”

Calculations show that Optus had 500,000 more customers on the 50Mbps tier at the end of last year compared to three months earlier, while TPG Telecom had almost 285,000 more. 

There is a corresponding exodus at the 100Mbps tier, just as iTnews previously observed in 2022, suggesting it is the same price modelling phenomenon.

The extent to which Optus utilised this kind of price modelling had never been clear prior to yesterday's numbers release.