Good morning everybody and thank you to CommsDay founder Grahame Lynch and Editor Petroc Wilton for inviting me to speak today.
This CommsDay Summit marks something of an anniversary in Australia’s telecommunications industry history.
It is just over ten years to the day since March 21, 2007 when then-Leader of the Opposition Kevin Rudd announced that a Labor Government would deliver the NBN, by fibre-to-the-node, at a cost of $4.7 billion, offering minimum speeds of 12 megabits per second to 98 per cent of the population.
How far we have come in the past ten years.
In the policy debate which has raged non-stop since that announcement, we have all spent a lot of time talking about technology and regulation.
But today, I want to focus on a topic which needs to retake its rightful place at the centre of the debate – the customer.
It was the customer’s need to access fast broadband which launched the whole NBN debate in the first place.
And it is the customer’s need to access fast, reliable and affordable broadband as quickly as possible which is at the heart of the Turnbull Government’s approach to broadband policy.
So at this year’s CommsDay Summit, I’m going to discuss three facets of the government’s policy approach that are relevant to the customer experience:
- First, the nature of the broadband upgrades being delivered
- Second, the question of broadband affordability in the context of competing business models
- And finally, the management of the transition from legacy networks onto the NBN
While the NBN debate has raged for ten years, we’re only now at a point where there are enough users on the network to actually judge what the real-world experience is like for customers.
When I spoke at the 2016 CommsDay Summit, fewer than 2 million premises were able to connect to the network – today there are more than 4.5 million.
When I spoke at the 2016 CommsDay Summit, there were 890,000 active NBN connections – today there are more than 2 million.
Around 30,000 customers are purchasing NBN connections every single week.
The NBN has rapidly shifted from a political debate to a working reality.
Over the next 18 months we will go from more than 1 in 3 homes with nbn access, to 1 in 2 homes, and then to 3 out of 4 homes able to connect.
It took six years to connect the first million users to the NBN, and less than 11 months to hook up the second million — a milestone nbn achieved just a couple of weeks ago. And nbn is forecasting being able to switch on over two million more homes and businesses in the next financial year.
With a critical mass of users connected and coming online — a customer-centric approach is taking on even greater importance.
The nature of the broadband upgrades being delivered
So, let me turn to the first issue: what upgrades are being delivered by the nbn and are they meeting customer needs?
Research undertaken by the ACCC found that 80 percent of customers are confused about broadband speed claims, and want information to be presented in a way which is easy-to-understand.
It is incumbent on the sector to help consumers to understand the change. The former ADSL service, at any particular address, was a fairly vanilla offering.
The nbn now comes in a range of flavours. And retailers are jostling to get new customers without sufficiently helping households understand what they need and can expect from their service.
This is why the Turnbull Government has announced a new program to provide consumers with better information on the retail speeds and experience they can expect from fixed-line broadband services delivered over the National Broadband Network.
The Broadband Performance Monitoring and Reporting (BPMR) program. To be implemented by the ACCC, it will source performance data from around 4,000 volunteer customers of retail service providers across the country.
Following a successful pilot program in 2015, approximately $7 million over four years will be provided to the ACCC to implement the program.
The program, which is modelled on similar successful programs in the UK and the US, will provide consumers with independent reporting of real-world broadband speeds.
This information will be much more useful to customers than confusing statements about theoretical maximum speeds or wholesale download speed tiers.
Performance information is a key factor for consumers when purchasing a broadband plan from a retail service provider.
And the Government acknowledges that this will be vital as demand grows.
Our goal is simple. Broadband consumers should be able to identify and choose what they need, and then get what they pay for.
By measuring and publishing information about the performance of broadband packages, consumers will be better placed to choose a plan that is right for them.
It will also encourage retailers to compete on the quality of their broadband services.
The next step for the implementation of the scheme will be for the ACCC to conduct a tender process to appoint an independent provider to run the program. Consumers will be invited to volunteer to have their NBN-based service monitored.
Participation will involve the installation of a small device on the customer’s modem, which will provide data on the performance of their service throughout the day.
Performance information will be made publicly available for the benefit of all Australians.
The performance monitoring program complements the ACCC’s announcement in February of six principles to assist retailers to ensure their marketing of broadband plans is consistent with Australian Consumer Law.
I also want to applaud the efforts of retail service providers which have undertaken to provide better information about the real-world speeds their customers can expect.
While the work of retailers is important and to be encouraged, individual efforts to publish actual performance data are complementary to the independent broadband monitoring program, rather than an alternative.
Further to the question of what the NBN upgrade means in network design terms. It may be useful to compare the wholesale speed tiers which customers are purchasing from retailers on the NBN, compared to the line speeds which are available.
Across nbn’s Fibre to the Node and Fibre to the Basement networks, the national average attainable rate – that is, the rate each line is technically capable of delivering – is 70.4 megabits per second.
And while the network speed baseline is nominally set at 25 megabits per second, nbn estimates that by 2020, 45 per cent of premises nationwide will have access to peak speeds of 500 megabits per second.
By comparison, when we look at the 2 million active services on the network, across all technologies:
- 29% of users have purchased services on the 12 megabits per second wholesale speed tier,
- 56% are on the 25 megabits per second speed tier,
- 4% are on the 50 megabits per second tier,
- And 12% are on the 100 megabits per second tier.
Interestingly, technology type does not appear to be a factor in the customer’s choice of speed tiers.
Across all NBN technology types, including in areas where FTTP is readily available, over 80% of users are purchasing broadband plans offering speeds of 25 megabits per second or less.
Almost 50% of FTTP users are choosing 25 megabits per second plans – while under 20% are choosing 50 or 100 megabits per second plans.
And while the FTTP portion of the network is capable of 1 gigabit per second, this wholesale speed tier is not being offered by RSPs. This is likely due to the fact that such services are priced accordingly to make a return on investment.
This fact should be a wake-up call to critics who believe that Australia’s broadband speeds are somehow being “held back” by not pursuing an all-fibre rollout. Even where higher speeds are readily available, affordability remains the critical factor for consumers.
And no doubt all retailers are acutely aware of the threat of new entrants and changes to business models being wrought by the NBN.
This is a once-in-a-generation industry transformation, and the dust has far from settled on the new market arrangements.
In fixed wireless areas, typically in the locations which have not had access to reliable broadband prior to the NBN rollout, 78% of users are opting for the 25 megabits per second speed tier.
Just 5% are paying for 50 megabits per second on fixed wireless.
Now we can’t have a conversation about customer experience without discussing nbn’s pricing model.
As announced by nbn in February, the new retailer-based discount model for capacity charges commences on the first of June.
The changes mean the more CVC a retailer provisions per customer, the less they will pay per unit. It rewards RSPs that provision greater capacity for their customers, and provides a release valve on price pressures from rising traffic volumes.
Previously, the discount applied to how much CVC the entire industry purchased on average per customer, offering no incentive for individual RSPs to compete on peak hour performance.
nbn has consulted with industry and received a broadly supportive response to the new pricing structure. The new discount model does not increase costs for voice-only or low-end users.
It’s worth remembering too, that a detailed regulatory framework governs the price caps under which nbn operates.
This framework allows for a modest return on the Government’s $29.5 billion equity investment, calculated out over an extended period out to 2040.
Indeed, it is the ability of Government to take on the high capital investment risk and accept a low return that has meant Australia’s retail telecommunications sector can benefit as a whole from the investment in new infrastructure, as well as the changing market structure.
Broadband affordability in the context of competing business models
This brings me to the second question central to the customer experience: is fast broadband being delivered at a more affordable price?
Behind this question lies an inconvenient truth which is often forgotten in the ideological wars over broadband technology: the NBN has to be paid for.
To keep broadband prices down for customers, this government is making the NBN rollout as cost-efficient as possible.
As far back as the 2013 Strategic Review, it was revealed that a gold-plated NBN rollout would force users to pay more on their broadband bills each month for services they had not shown much appetite for.
If nbn was required to deliver the 7.1 percent rate of return envisaged in that Corporate Plan, it would have had to increase wholesale prices by between 50-80%.
This price would have ultimately been passed on to consumers through retailers, and would have added up to $43 per month to typical household broadband bills.
That’s over $500 added to internet bills every year.
Under this Government’s policy, the capable management at NBN has brought costs under control, while bearing much of the capital investment risk and moving as quickly as possible to adjust the pricing framework in response to data consumption patterns.
And as a result, customers are transitioning to an upgraded network at price points that remain affordable and with significant increases in data inclusions.
The latest ACCC report into telecommunications price changes found that while prices paid for NBN services increased in real terms by 4.4 per cent in FY16, data inclusions for plans sold over the NBN jumped by 75 per cent.
And by another measure, basic retail plans on the NBN are proving more affordable than ADSL services.
The Productivity Commission’s draft report into the Universal Service Obligation found that “basic NBN packages currently on the market are at least 25 per cent cheaper in metro areas and 14 per cent cheaper in non-metro areas than the cheapest ADSL2+ plans.”
A quick market scan today shows there are low cost plans, providing 100 gigabytes for $50 a month, all the way up to high-capacity, high-speed plans with unlimited data for $90 a month.
At the cheapest end of the market there are plans available for just $30 or $40 a month.
Perhaps the most striking differences in broadband prices will be for customers living in regional and remote areas.
In recent weeks, nbn announced an upgrade path for fixed wireless services to offer 100Mbps download speeds and 40Mbps upload early next year.
Today, the Fixed Wireless network reaches nearly 500,000 premises across regional Australia with 170,000 premises already connected.
In many of these areas, users have often had no fixed-line broadband access at all, or the only option besides satellite has been 3G or 4G mobile broadband – which carry a substantial price premium over fixed line services.
Importantly, the rollout in regional Australia is more advanced than in urban Australia. 70% of premises covered by the NBN today are in regional and non-metro areas.
The management of the transition from legacy networks onto the NBN
The third matter of pressing interest for us all here today is the consumer experience during the transition to the NBN.
My attention is keenly focussed on how the NBN rollout is progressing, and what nbn is doing to meet its very challenging rollout targets while making the transition for consumers as smooth as possible.
The Government made this very issue a priority in our updated NBN Statement of Expectations, saying:
nbn together with retail service providers should work to ensure a high quality end user experience through the migration and ongoing service periods. This includes working closely with retail service providers to proactively manage any complaints.
With any project of this scale, there will inevitably be issues to be worked through, and to date the industry and nbn have been working together to improve migration processes and resolve customer connection problems.
But we must double-down on our commitment to the customer if we are to deliver on the promise of the NBN.
As retailers jockey for market share it’s important to remember that the customer is the prize, and should be treated as such.
First and foremost, nbn and RSPs must improve the service activation process for customers. With 30,000 customers connecting to the NBN every week, and that number set to climb even higher in the coming months, it should come as no surprise that some short-term investment will be needed to manage the high-touch interactions.
The industry must adjust to the joint accountability that is required. There is growing evidence of an air-gap between nbn’s processes and that of the retailers’, which has a tendency to result in buck-passing if connections don’t run exactly to plan.
Too much of this remains unresolved, and it has occurred from all sides.
In response, nbn has embarked on a strategic program of work focussed on improving the end to end customer experience.
This initiative will look at all of the parts of the NBN experience – placing an order with retail service providers, selecting service plans, installation and activation, and the everyday experience on the network.
The initiative has been designed based on feedback from retail service providers and end-users, and global best practice.
nbn’s overarching goal is to enable a seamless, consistent connection with minimal disruption for consumers.
I have also asked the Department of Communications to enhance its efforts in working with industry, Communications Alliance, the Telecommunications Industry Ombudsman, the ACCC, the Australian Communications and Media Authority.
The Department has recently restructured its Infrastructure group to bring together the areas with responsibility for the NBN, regional broadband, NBN migration, and consumer protection.
It has also established a new branch focussed specifically on broadband consumer issues.
The Government’s Migration Assurance Policy and Framework also set out our expectations for arrangements that support the smooth transition to the NBN.
Work is underway to update that framework to ensure the central tenet will be a customer-centric approach.
As I mentioned earlier, consumers have expressed serious concerns about the handballing of complaints between industry players.
Clarity of roles and responsibilities – and each party being committed to fixing problems quickly in the interests of the consumer – is key to a smooth, straightforward and seamless migration experience.
In coming months, the Government will be closely monitoring the activities of retailers in this migration process to determine whether the Migration Assurance Framework is sufficient to provide a positive experience for consumers.
The Federal Election
Given this is the first CommsDay since the last election I’d like to make one brief point that relates to this audience in particular, and that is in regard to policy and regulatory certainty.
As you know, the Coalition Government went to the election with an NBN and Mobile Black Spot Program policy that had been in the marketplace since 2013, had been tried and tested over three years, and that provided policy and regulatory certainty in what is otherwise a highly disrupted commercial environment.
In comparison, our political opponents put forward an NBN policy proposal that claimed to be able to install Fibre to the Premises to an extra 2 million homes, at “exactly the same amount of public funding”.
But we know that FTTP costs nearly twice as much per premise than FTTN. Further, it was claimed that this could be done by 2022 – an optimistic assessment to say the least.
On the Mobile Black Spot Program, our opponents avoided making any commitments of their own, only stating that Labor would support the Coalition’s third funding round for the program – but not confirming if they would continue the rollout of rounds 1 and 2.
This Government believes that the communications sector and its customers not only deserve better than that from an alternative government, but that thousands of jobs and billions of dollars in investment are threatened, if not frozen, by such an approach.
So to conclude, just in case I haven’t rammed home the message enough, 2017 is the year of the customer, and all of our efforts must be focussed on this.
Central to the customer experience are the key questions:
- Are consumers armed with good information to understand what they need from a broadband service?
- Are consumers getting what they pay for, and is the market differentiating to cover a wider range of segments from the affordable end to the premium services?
- And are there adequate safeguards to ensure continuity of service and limited disruption while transitioning to the NBN?
As the rollout of the NBN continues to gather pace, I look forward to working with all of you to ensure that the answer to each of these questions is a resounding “Yes”.
 NBN Strategic Review p68