Experts defend NBN after Government admits just 11% take-up rate in Tasmania

The Government has admitted the take-up of the National Broadband Network in Tasmania is a lower-than-expected 11%, fuelling criticism the network is too expensive and unnecessary for current mainstream broadband requirements.

But experts say the take-up isn’t necessarily disappointing and simply demonstrates customers are still more concerned about price than speed.

“I think what’s happening now is still a trial, and so to say that the take-up rate shows the network is failing… I think perhaps maybe people are just waiting,” Telsyte research director Foad Fadaghi says.

Yesterday, communications minister Stephen Conroy quoted NBN Co. chief Mike Quigley as saying the network is currently recording an 11% take-up rate so far, based on the current rollout in Tasmania.

“Of course, most customers will have to see out existing contracts before they can make the switch to the NBN but as more retail service providers come on board, they will be able to transfer their customers sooner. So far five providers are offering services on the NBN in Tasmania,” Conroy said.

But the Coalition has quickly jumped on the figures, telling The Australian they are “appallingly low”, and that the low amount of premises using the NBN service suggests the whole scheme is a farce.

The office for opposition communications spokesperson Malcolm Turnbull was contacted this morning, but it was unattended.

However, Fadaghi says the relatively low take-up rate isn’t disappointing. In fact, he says it should be expected, given the sheer nature of the prices for packages currently available on the network.

“From my point of view, the NBN trials in Tasmania are happening at a time where there is a lot of price competition in the ADSL market. One of the things we see in our research is that people won’t want to pay the same rate for a different type of service.”

“Particularly if you look at the lower-level packages, which have speeds of about 25mpbs, you see the market is still very price sensitive. I’d also like to find out which socio-economic groups are being targeted.”

Prices for contracts with top speeds of 100mbps in Tasmania currently run at about $100 per month, while packages with lower speeds of about 25mpbs and 50mpbs can run anywhere from $30 per month to $80.

Fadaghi says these types of deals don’t necessarily cut it alongside the price wars being fought among internet retailers, where ADSL services are now offering download quotas of hundreds of gigabytes per month for under $100.

“What it tells me is that the NBN has to be a good deal and relative to that point in time in the market. If there was a price war or a price cut in ADSL services, then the NBN trials also need to be competitive to attract people to the service.”

Ovum research director David Kennedy also says the low take-up rate isn’t an indicator the network will fail. In fact, he says the statistics are well in line with the rest of the country.

“I’m not really surprised by that rate. If you look at the ABS data on speeds, most people are using well under 10mbps a second. That’s quite adequate for most people’s purposes, and there isn’t a lot of perceived value in moving up.”

“Now, clearly, some are seeing the advantage in signing up. So I’m not surprised at that figure and over time you should expect that to increase. The trend is for more people to move up to higher speeds as time goes on.”

Conroy defended the take-up rate in his statement, saying the Government has already released figures showing that if the take-up rate remains the same, then the network will still remain financially viable.

“The Implementation Study found that the NBN would be viable, with affordable prices for consumers, on the basis of take up of premises passed of between 6-12% per year. NBN Co is already at the top end of that range after just four months.”

Fadaghi also points out the NBN rollout isn’t complete yet and it is still premature to say the network isn’t viable when the construction is still being marketed by the Government as a trial.

“At the end of the day, this is a trial. And if it’s being marketed as a trial, then some people may say they’ll just wait until the whole thing comes on broad.”

“Maybe some people are ultimately wary of getting involved in the trials, because they don’t want to jump into something that’s this new too fast. They’ll take a conservative approach and feel as though they’re happy right now – but that can change.”