Prices to use the NBN
I have often pondered the strangeness of the NBN pricing methodology (technically known as the beer-coaster method).
The NBN is being paid for by the taxpayer. That is, the Government of Australia is providing the money to build the NBN.
But the government doesn't have the money. So it is borrowing it.
But the government doesn't want to say that it's borrowing the money. So it has set up a company called NBN Coy Ltd and NBN Coy Ltd is technically borrowing the money. But its borrowings are guaranteed by the Australian Government.
Just to make sure that the NBN borrowings are not included in the Government's budget, the Government has called the NBN Coy Ltd an "investment" that it expects to pay a dividend.
In order to pay its operating costs, salaries, payments to Telstra ($11 billion) its interest payments, depreciation, amortisation and other expenses, NBN Coy Ltd will have to charge its customers (you and me, the taxpayer) pretty hefty fees to use the NBN.
So we have to pay to use infrastructure that we paid for in the first place.
Any economists/merchant-bankers/financial-analysts/conjurers care to help me if I am seeing this picture incorrectly?
Please subscribe to The Australian to read the article below.
Warning on speed increase charges
- by: Annabel Hepworth
- From:The Australian
- January 02, 201312:00AM
Telecommunications economist John de Ridder, who was at Telstra for 18 years and is now a consultant, has urged the competition watchdog to reject the NBN Co's pricing plan.
Under the controversial plan, internet service providers pay
a fixed monthly charge for each user they connect -- starting at the cheapest, slowest 12-
megabit-per-second (Mbps) service of $24 and rising to $38 for a 100Mbps service -- as well as a further usage-based fee for the amount of data.
Mr de Ridder says charging users for speed is a waste of expensive capacity.
"Restricting access speed is like building a motorway and then using only one lane," he has told the ACCC in a written submission.
He has also criticised the way the NBN Co has constructed its usage-based fee, warning that it discriminates against small-scale retail internet providers because they have to pay for that in set bundles and providers with very few customers for a bundle will make a lower profit margin.
"Australia has a one-time opportunity to be a world leader in having not only a ubiquitous broadband network but also in having a network that is used to its full potential to transform economic and social relations," he says in the submission.
"The current NBN tiered speed service and pricing offer will not do that."
In August 2011, the NBN Co agreed to a system of rebates on the usage-based fee until customer take-up on the new network hit "critical mass" of passing 30,000 premises in a service area, saying this would help internet service providers build their customer base.
Mr de Ridder was involved in TransACT's proposals when Labor was taking bids for NBN Mark 1, which was a $4.7bn project dumped in 2009 when Labor announced that no bidders had met the bid requirements and that a government-owned company would build a network costing up to $43bn.
The NBN is now expected to cost $37.4bn to roll out.
NBN Co spokeswoman Rhonda Griffin said the government-owned company had consulted extensively with industry on its products and pricing since 2010.
The model had been factored into the corporate plan, which forecast that the network would pay for itself by 2033.