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Macquarie: NBN Pricing Revision Won’t Benefit Telcos

Macquarie analysts have advised that changes to the NBN pricing model could enable Australian telcos to lift their margins, however, the promise of any serious benefit is unlikely.

The analysts believe the proposed changes could improve the end user’s experience, but do attest that Australian telcos are unlikely to see any meaningful gains.

The news follows reports that the NBN will change its wholesale pricing model to increase consumer uptake of high-speed tiers. At current, the majority of Australian consumers are opting for slower-speed NBN packages. The pricing revision needs to be balanced to ensure that Australian telcos still purchase enough capacity to deliver a quality service.

Macquarie affirms that the pricing change will not deliver a significant return to Oz telcos :

“While this may be positive for retail service providers at the margin, given the competitive backdrop we do not expect that these price changes will deliver them material, sustainable increases in average margin per user”.

Reports state that leading Australian telcos – such as Telstra, Vocus and TPG Telecom – make less of a return on NBN customers, compared to those still on ADSL connections.

Australian telcos attribute the high wholesale prices charged by the NBN Co. as the primary reason.

NBN Co Chief Executive, Bill Morrow, has alluded to the introduction of a new 50 Mbps product, which is more closely aligned with the current price of the 25 Mbps package.

Mr Morrow has advised that a direct cut to NBN wholesale prices is not up for consideration.

Macquarie analysts believe the new product could result in lower average retail prices, provided it is well executed:

“While it probably wouldn’t lower average retail prices, any shift toward higher bandwidth offerings could lower the risks from mobile substitution”.

Since the NBN’s rollout, many Australian consumers have voiced their frustration at the service, which in turn has only increased the temptation for other consumers to opt for mobile.

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