nbn overhauls wholesale pricing in business sector push
- 27 September, 2017 00:00
Bill Morrow - nbn CEO (nbn)
The company behind the rollout of the National Broadband Network (NBN) is hoping to make its business-grade services more competitive and flexible with new changes to its wholesale pricing model.
From 1 October, nbn will introduce a new spend cap on its high bandwidth business products enabling retail service providers to save on monthly wholesale charges.
The network provider’s Traffic Class 2 wholesale business offering is designed to support applications such as video conferencing, converged business collaboration, IPTV or gaming.
According to nbn, the new pricing model was developed to help NBN retail service providers (RSPs) package up plans targeted at medium and enterprise businesses – specifically, those with between 20 and 200 or more employees.
The new pricing will vary based on the amount of bandwidth RSPs buy each month. nbn expects its higher speed tiers to deliver the greatest reduction in overall costs to RSPs.
The move comes as nbn works to increase the average revenue per user (ARPU) it generates from its national network, which has remained relatively stagnant for the past year.
In its annual financial results for the year ending June, nbn revealed that its ARPU had remained static at $43 per user, per month, in line with the previous year’s tally. In FY15, ARPU was $40.
Since the NBN rollout began, ARPU – the average revenue generated per end customer, per month – has played an essential role in the modelling of the estimated future profit of the company.
Indeed, nbn’s 2017 Corporate Plan referred to an increase in ARPU as one of just a handful of “critical sensitivities” that could affect the company’s long-term financial outlook and impact its peak funding range.
In February, nbn flagged its ARPU rate as a risk factor to its revenue forecasts, with nbn chief, Bill Morrow, himself suggesting that nbn would need a greater uptake of higher-speed products to reach the $5 billion annual revenue target it had set itself for 2020.
In August, Morrow put NBN resellers on alert, claiming that customer footprint “land-grabs” are hampering efforts to raise the average revenues arising from the network’s customers.
“All up, we figure there are about 180 different brands selling into the country today. Now that’s great news, but it has created a little bit of this land-grab phenomenon where there are elements and signs of a price war,” Morrow said at the time.
“Now, on one hand that’s good for the consumer, there’s no doubt about that, you keep prices down very low. On the other hand, we’re missing opportunities to truly tailor our products and services to the end users’ needs,” he said.
Regardless, Morrow remains optimistic that growing data demands and increased buy-in from the business segment are likely to help see ARPU reach the lofty heights expected of it to deliver the profits forecasted for 2021 and beyond.
This is where nbn’s new wholesale pricing model comes in, with the company hoping that the new pricing will drive the uptake of higher-tier products among the business segment, rather than the consumer segment – which has demonstrated a less than expected appetite for higher-speed products – while at the same time, driving up ARPU.
The company undertook industry consultation ahead of announcing the new spend cap and confirmed it will replace the nbn Business Ethernet (nBE) product, which was scheduled to launch later this year.
“Today’s announcement demonstrates our ongoing commitment to adapt and optimise our products and pricing in order to keep up with market trends,” nbn’s executive general manager, product, sales and marketing for business, Ben Salmon, said.
“We’ve taken on board the feedback provided by a number of our retail service providers and have developed a new pricing model to enable those offering high-speed broadband, voice services and after hours care on the nbn access network to market their products at a more cost effective price for their business customers.
“These product offerings are particularly aimed at helping Australian medium and enterprise businesses to harness technologies such as cloud computing, multi-line voice, video conferencing and multimedia rich applications to increase their efficiencies and drive revenue growth,” he said.