[LINK] NBN and ISP differences?

stephen at melbpc.org.au stephen at melbpc.org.au
Fri Feb 18 15:16:33 AEDT 2011

Michael writes,

>> As they will presumably be charged similiarly for wholesale NBN access
>> then each public access provider will need to offer differing services.
> I don't know if that is certain. It may be that NBN ends up with a
> price for 1-50 connections, 51-500, 501-5000 and 5000+ (for example).

Yes, that is certainly one way for NBN Co to base $ returns, but, maybe
also discriminatory, and an ISP-non-competition-promoting charging model? 

Here's the Feb 2011 "Review of NBN Co Limited’s Corporate Plan" via here:


which, as i read it, seems to suggest a speed-based charging model? If so,
then ISPs will be keen to move customers up in speed with their additional
differientiated offerings. Of course, this does not preclude your number-
of-customers based NBN-ISP charging model thoughts as well, Michael. 

To get back to the original idea, ISPs providing 'security services' one
might assume this would require heavy-duty 'broadband background' speeds
and so perhaps a nice little earner. Also, security managed this way may
be better for all users, considering those who do nothing about security?



'Average revenue per user' consists of baseline connection fees as well as
usage-based rates charged to customers. ARPU is important in driving
return increases over time as volume growth (up take) plateaus, shifting
revenue growth from new users to increasing returns from each connected
customer. The NBN Corporate Plan assumes ARPU will rise over time as usage
per customer increases. 

Consumers of telecommunications services generally have an expectation
that prices for services will decline or that consumers will receive
higher value services for same price over time. The Corporate Plan
assumes that on a per unit basis, the real price of service will 
decrease over time. This loss is assumed to be more than offset by the
increase in consumer spending on broadband services as they purchase
higher quality services, measured in usage and potentially targeted or
committed speed levels. These services will differ for individuals,
businesses and government entities. They could include on-line health
services (including telemonitoring and time-critical expert consultation)
on-line educational services, "over-the-top" communications and video
services, Internet Protocol television ("IPTV"), gaming and other
vertical applications / services. 

NBN Co’s pricing philosophy maintains low price increments between the
different access speed tiers in order to encourage an upward movement
through pricing levels. The actual retail prices and services / products
offered  to consumers are largely outside NBN Co’s control, but in our
view NBN Co’s proposed pricebook and approach to pricing are conducive 
to allowing RSPs to develop and market applications and services that
will meet and encourage the expanding speed and usage requirements of a
potentially growing number of internet users. 

Key risks of ARPU assumptions include potential consumer pushback on the
usage-based pricing model, the potential need for lower prices to
overcome initial low up take, a faster than expected erosion of RSP
margins on base-level products (which may affect consumer willingness to
buy materially higher priced products) & potentially lower-than-expected 
growth in attractive internet-based content and "over-the-top" services
requiring higher speeds and usage rates.  


> That would still be offering the same price to all parties, but on the
> basis they purchase the same number of links, and volume based
> discounting is normal in telco.
> Certainly, I think there will be disincentives to small operators
> buying from the NBN directly, as the access seeker stuff I have seen
> presumes a pretty sophisticated level of back-end systems for
> provisioning/billing/support etc.

Re ISP back-end systems, won't that be how ISPs differentiate in future?

> Regards,
> Michael Skeggs
> _______________________________________________
> Link mailing list
> Link at mailman.anu.edu.au
> http://mailman.anu.edu.au/mailman/listinfo/link

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