National broadband pricing infrastructure not telco-based.
The pricing operations of the new national broadband infrastructure should not be telco-centric. The government is making this investment to stimulate economic innovation, not necessarily telecoms services, and so we should look at an infrastructure-based pricing mechanism rather than a telco-based model.
The wholesale price of the NBN should be such that it reflects the government’s policies to stimulate the digital economy. In other words it should be affordable for organisations to build their own services on top. As a very rough guideline the price of the wholesale infrastructure service should be no more than 10% of the total price of the end-user application. Obviously this will depend on the nature of the application and there will no doubt be many exceptions to this rule. Another guideline is that the price of between €7and €13 in the Netherlands for a Layer 1 service is currently seen as too high.
Also, on an open network some providers might want to include the infrastructure charge within the overall price of their service; or certain e-health and education services could be modelled around health insurance and taxation facilities. Energy companies could include smart meter services within their energy pricing models. All sectors and providers should be able to decide how they structure their pricing mechanism. There will not be one gatekeeper.
The price should reflect the fact that the various sectors and providers can share the costs of the infrastructure. It would be unacceptable if all providers were to charge a basic access fee.
A possibility here would be to set an appropriate basic connection/access charge – one that is low enough for all users to have access to a basic service (USO), with a subsidy available to those who can’t afford it. This could, in fact, be a tax or a ‘real estate’ fee for a lifetime connection. It could become part of the mortgage or part of a council charge.
If amortised over 20 years the annual fee is rather small, perhaps as low as $60 per annum. This fee should provide a regulated service level that would allow for the delivery of basic services. It should be reviewed regularly, and adjusted when appropriate, in accordance with changes in society and technology.
Once this pricing arrangement is in place the barrier is removed for others to use the utilities-based infrastructure to build their own independent business model for the delivery of their services to their end-users. Such a model would also stimulate the infrastructure company to deliver innovative new wholesale services above the basic offering, as that would positively affect their own revenue models – again, of course, working from a sound regulatory framework.
It is also important to remember that the current telco price is based on speed, which is subject to the limitations of the copper network and as such is rather irrelevant to the fibre network. Many applications that will be delivered over the infrastructure won’t necessarily require a high speed.
Other key elements of a fibre network are security, reliability and the low maintenance and running costs.
As this price will be regulated it will be possible to adjust pricing over time to reflect changes in technology, society, the economy, etc.
On top of the basic connection fee access prices can reflect heavy or specialised use. In other words, there could be categories of wholesale services that would apply to consumers, small businesses, corporates, etc.
See all BuddeComm’s NBN reports.
