What will Australian consumers pay for 100Mbps with the NBN?


Last night SBS World News ran a segment on the Australian National Broadband Network plan, including Prime Minister Kevin Rudd and the leader of the opposition debating its merits, and a piece on how much broadband is likely to cost consumers, which took some snapshots from an interview with me.

Unfortunately the small quote they took from me and its positioning in the story seemed to imply that I thought that $100 per month was acceptable pricing. Here are the points that I made while I was being interviewed:

* While some analysts have suggested that consumers will have to pay $100 per month for broadband access to make the project commercially viable, there are highly questionable assumptions in their methodology.

* Consumer telecoms pricing has been and will increasingly driven by bundling and integration with value-add services. As I pointed out yesterday, telcos need to shift to value-add services, including content, and this will drive how services are priced.

* People will be prepared to pay a little more than they currently are for vastly superior services. Not three times as much, but a little more.

* The pricing of any service is only meaningful in a market context. Pricing has to be set relative to demand and competitive alternatives rather than the cost of provision, and the landscape for broadband offerings is rapidly evolving.

* The Australian government, if required, is likely to effectively subsidize consumer broadband access. There is no reason to think at this point that it will be necessary, but if so this will likely be an investment that will yield substantial and commensurate economic and social returns.

* This all comes back to the politicians’ argument as to whether commercial entities will want to invest in the project, which is clearly fundamental to its success. The government says they will, the opposition says they won’t. While there is still a lot of number-crunching to be done, my bet is that there won’t be a problem getting investors, not least because there will be significant strategic benefits of being involved in this project. Let’s see.