Vocus to push NBN Co for low price plans

Vocus will use NBN Co’s wholesale pricing review to press the need for lower entry-level broadband pricing, revealing cost-conscious consumers are migrating to lesser quality NBN services that cost $11 a month more than ADSL did.

The telco - which is home to consumer brands iPrimus and Dodo, and is the fourth-largest retail service provider on the NBN - today unveiled a three-point wishlist it will pursue through the pricing review.

While NBN Co is apparently unconvinced price-sensitive users want lower-priced plans, Vocus’ CEO of business and consumer Antony de Jong harbours no such doubts.

“We're looking for a lower level of entry pricing,” de Jong told a Vocus strategy day on Wednesday.

“The reality is that a lot of our customers came from $39 plans on ADSL and today they can't get $50 plans from the NBN that give them the same service, even at the speeds they had on ADSL.

“For those customers, an $11 difference is actually quite material because they've got to pay the rent and they've got to deal with their other expenses.”

de Jong said his experiences of what price-conscious consumers wanted had been formed in part by listening to those customers in call centre operations in Manila.

“I listen to the calls, and I'm very conscious of how many customers need financial assistance and time to pay … on what's essentially becoming a key service for them,” he said.

“We hear a lot of stories about kids homework and schools being connected, and I really do feel this is one of the reasons we need to be very vigilant on getting low price plans for Australia and for our digitally-connected communities to remain connected.

“A lot of those communities are not high-end and unable to pay for high costs. So for us, lower entry level pricing is key, even if it means diminished service and diminished speed.”

NBN Co has spent the past two years making it hard for RSPs to offer entry-level services. Retail prices rose and performance was progressively cut.

NBN has now temporarily stepped back from the price and performance squeeze, but too late for many; Vocus dropped its 12Mbps plans and raised its prices back in April.

de Jong indicated the price rise in April had been difficult for Vocus and for price-conscious users, particularly those on Vocus’ Dodo brand services.

“Customers demand certainty; 70 percent of our customers are actually on unlimited plans where they get that certainty and because a large portion of those customers are very budget-conscious, they want that certainty,” de Jong said.

“But the cost an RSP like Dodo or iPrimus pays to NBN Co is uncertain because it's a variable pricing model based on consumption and use. 

“So it's very important that we get to an aligned position on price with our customers to enable us to carefully manage the network consumption so that we can still make a margin. 

“That's something we're very focused on. We've got experts in the business that look at that every day to make sure that we're matching the dynamics of supply and demand so that we can give the customer certainty, still make a margin and give them a good experience.”

de Jong called for “greater simplicity and certainty” from NBN Co’s prices and constructs. 

“We have to address the alignment between unlimited data plans being the norm in what is sold in this country, and the variable costs associated with CVCs [connectivity virtual circuits, the network link between NBN Co and the RSP], and the different tiers [of service] available,” he said. 

“I actually think a range of tiers is very important. 

“For basic access, a low speed at a low price is perfectly acceptable, whereas for a small business that is dependent on data, clearly you want to give them an unlimited plan with the fastest possible speed they can have to that premises, because every minute counts that they're connected.”

Also on de Jong’s wishlist from the NBN pricing review is “fairness”.

“Fairness is about a level playing field,” he said.

“It's acknowledged I think that it's not level today. 

“The bigger organisations have benefited from NBN's rollout. It's time to address that and make it simpler by removing some of the complexity that is hurting competition in NBN.”

de Jong lamented that one of the outcomes of the NBN was increased concentration of power with the two largest players in the market.

“They had to get bigger at the expense of some of the smaller players and so that's been a challenge,” he said.

He also lamented NBN Co’s ongoing economics and margins - Vocus has consistently called out NBN vs ADSL margins in its financial reports - and problems with the “FTTX alphabet soup” of access technologies, and the customer lottery on which one they’d end up with.