Optus reveals the extra "millions" spent a month serving 12Mbps NBN users

Optus is incurring “millions of dollars” a month in excess charges to serve its 12Mbps NBN user base as a result of NBN Co’s price squeeze on the entry-level market.

The comments, contained in Optus’ submission to the NBN price review, mark the first time a retail service provider (RSP) has publicly revealed the cost of NBN Co’s campaign against entry-level users.

NBN Co has slowly made it difficult for RSPs to sell entry-level services, to the point that many now don’t.

Some have gone through the tough process of trying to upsell these customers to more expensive services.

Others have continued to service legacy 12Mbps users via an old NBN pricing model; however, NBN Co recently attempted to gut that option by removing a longstanding discount, only to back down on it a few months later.

Others still - including Optus - appear to have moved their 12Mbps user base to what NBN Co calls its “entry-level bundle” or ELB.

The ELB is considered by NBN Co to be for voice services only and comes with a puny 150Kbps of included bandwidth and high punitive charges for excess use.

Optus revealed in its submission to NBN Co that it is now copping those punitive charges because it is using ELB as a broadband product.

Worse, the company appears to have no option but to absorb the charges because the remaining 12Mbps users are on lines incapable of supporting higher-speed services.

All RSPs - Optus included - were previously shamed by regulators for having customers on plans that their lines were incapable of.

“RSPs are being charged millions of dollars each month in CVC [connectivity virtual circuit] overage charges under the Entry Level Bandwidth bundle, relating to the continued provision of 12Mbps services,” Optus said in its submission.

“As NBN Co would be aware, there remains a non-insignificant cohort of customers that RSPs cannot move off 12Mbps services due to the quality of the underlying NBN access network. 

“For these customers, Optus is incurring material overage monthly charges.”

NBN Co’s price review suggests the company is now considering reinstating a proper entry-level broadband product, at either 12Mbps or 25Mbps.

Optus said it was “puzzled” by the proposal, given NBN Co’s multi-year campaign waged against entry-level users.

It called for an immediate end to overage charges while the mess is sorted out.

“Whilst there is merit in relaunching a 12Mbps [broadband-oriented] service, NBN Co should consider the costs to industry of its about-turn on this issue,” Optus said.

“NBN Co must address the material costs incurred by Optus and other RSPs – and which continue to be incurred each month – due to the $8/Mbps overage charge imposed on usage greater than 0.15 Mbps for each 12Mbps customer.”

Optus said it had incurred additional “material costs to manage our [legacy 12Mbps] customer base onto alternative access products.”

“Optus incurred significant costs to migrate customers away from the 12Mbps access product onto either 25Mbps or 50Mbps,” Optus said.

“As NBN Co would be aware, the process to move customers onto alternative access speeds is highly regulated. RSPs are not free to simply move customers.

“RSPs must follow the regulations and processes set out by the ACCC and the ACMA. Indeed, due to NBN line quality issues, Optus is not able to move all customers off 12Mbps services. 

“For those customers that were able to migrate onto higher speed Optus incurred costs to undertake the necessary notifications and tests. 

“This also included offering certain end-users the option to end their contract without cost.”

Optus appears clearly frustrated its recent efforts may have been wasted as NBN Co now considers reinstating a usable 12Mbps service.

“Prior to this consultation, NBN Co provided no indication that the withdrawal of the 12Mbps broadband services would be temporary,” Optus said.

“We were under the very clear impression that there would be price stability following the last pricing consultation.”

Optus continued, “The fluidity in NBN Co’s position on the 12Mbps product is not helpful and creates cost and uncertainty for RSPs. 

“NBN Co made clear representations as to the future treatment of broadband bundles and Optus has made material investments based on these representations.

“As a result of its shifting position, Optus recommends that NBN Co immediately waive any overage charges in relation to the ELB product to ensure the current 12Mbps service remains affordable.”

There remains evidence that NBN Co is still unwillng to put together a useful broadband package for price-sensitive users, despite the debacle it has created by trying to gut that part of the market.

Most RSPs have now told NBN Co they want decent entry-level options, potentially including a discounted product for customers receiving government assistance, as well as a cheaper option for anyone else.