Experts warn internet usage prices to rise under NBN

Internet service providers have complained the National Broadband Network will force up the price of internet packages, saying that extra infrastructure charges will mean users pay up to $20 more for the same services they receive now.

The accusations come after the NBN provided internet service providers with a calculator that allows companies to see how much they will need to charge.

Telsyte senior research analyst Chris Coughlan says internet prices will definitely go up when the NBN is underway.

“Back in January when the pricing was first released, I highlighted in a report that essentially costs are going to be higher for ISPs, and it’s amazed me that it’s taken them this long for them to say it.”

The National Broadband Network was contacted for comment this morning, but no reply was available before publication.

Internode general manager for regulatory and corporate affairs John Lindsay told the Australian Financial Review this morning that Internode consumers might end up paying $20 more for services under the NBN.

“The cost of using the NBN… will be around $20 more than current naked ADSL plans,” he said, arguing that an extra $10 would be charged under the NBN for ADSL2+ and phone line services.

Vocus chief executive James Spenceley also said that his prices will need to increase, potentially up to 54%. This is based on the results of data entered into a calculator provided to ISPs by the NBN Co, used by each company to determine how much they should charge.

Spenceley was also contacted, but no reply was received before publication.

Coughlan says much of the increase is due to extra infrastructure charges, especially for ISPs which have to manage their own backhaul infrastructure now. He also points out that with the NBN’s rate of return targeted at 7%, extra charges will be a must.

John Lindsay also argues that the NBN Co. is charging “excessive prices” for downloads in certain areas.

“If you look at the current pricing structure,” Coughlan says, “ISPs are paying Telstra for line subscribers. The actual broadband charge can be quite low, but it’s done in such a way that the cost of the copper access is borne by the voice networks.”

“That’s different under the NBN Co. pricing.”

Coughlan says because consumers have been used to competitive broadband pricing for some time now, there will be a backlash when they are forced to pay extra – all because of infrastructure chargers for ISPs.

“What’s happening is that ISPs are now managing their own costs associated with backhaul and transit charges, but they also pay NBN a higher figure as well for charges.”

“As well as the access charges, the pricing that NBN has announced predicates a bundling of services. It predicates that you need to bundle in a voice service as well.”

Unfortunately, Coughlan says, there’s not much that can be done. Because Telstra will be disconnecting its networks as part of the deal with NBN Co., users will eventually see their broadband charges rise.

“People won’t have a choice. Telstra will have an obligation to disconnect copper, but what are subscribers going to do? They’re not going to be able to stay on copper networks… they simply won’t have a choice.”