NBN taken to task by ACCC over discriminatory behaviour

NBN Co has received a slap down from the ACCC for discriminating between RSPs and for providing Macquarie Telecom with pricing details months ahead of its competitors.

The government-owned wholesaler has been given a formal warning over the discrimination with the ACCC accepting a court enforceable undertaking from NBN that it will put in measures to ensure similar doesn’t happen again.

The action, which relates to NBN’s enterprise Ethernet offerings, is the first time the ACCC has used its power to issue a formal warning for a contravention of the service providers. NBN Co is prohibited under Competition and Consumer Act obligations from discriminating among retail service providers in the supply of regulated wholesale services and related activities.

The ACCC says from at least January 2018, NBN offered ‘materially different’ commercial terms to different RSPs as it upgraded its infrastructure to support high-speed, business-grade services. It also provided Macquarie Telecom (which ACCC says did nothing wrong) with indicative pricing information for its new enterprise ethernet service in January 2018. It wouldn’t be until May 2018 that other RSPs would see that same information.

ACCC chair Rod Sims says NBN Co failed to comply with its non-discrimination obligations on a number of fronts.

“These legal obligations were enacted to ensure that NBN Co does not distort competition in the market for retail NBN services, such as by favouring larger RSPs.”

The ACCC says it found no evidence that NBN’s actions resulted in specific harm or competitive detriment and that market feedback found NBN’s entry to the wholesale markets had increased competition, particularly in areas where Telstra was the only other fixed-line infrastructure provider.

Sims says the action was nonetheless a serious breach of NBN’s non-discrimination obligations.

“The undertaking we have accepted from NBN Co is intended to ensure that all access seekers can compete on an equal footing going forward.”

In its undertaking to the ACCC, NBN co admits it didn’t have appropriate processes in place to ensure compliance with transparency and non-discrimination obligations. It has committed to offering consistent contract terms and to providing information at the same time to all access seekers, as well as implementing ‘extensive compliance processes’. An external audit of its compliance will also be required.

“We will be closely monitoring NBN Co’s conduct under the enforceable undertaking, and reserve our right to take further action if we are not satisfied,” Mr Sims says.

ACCC to NBN: Improve service or pay the cost

Sort the service problems or pay the price. That the message from the Australian Competition and Consumer Commission, as it proposes new terms – including increased rebates for missed appointments, late connections and unresolved faults – in an effort to improve NBN Co’s wholesale service levels.

The consumer watchdog has released a draft decision for new regulated wholesale terms for the service standards NBN provides to RSPs. Among the proposals is that one-off rebate payments switch to a daily penalty, at an increased rate, and rebate rates for missed appointments increased from $25 to $75. Also flagged is a $20 monthly rebate introduced for underperforming fixed wireless services.

The proposals are part of the NBN wholesale service standards inquiry, which kicked off back in 2017 as complaints about the service soared. The Telecommunications Industry Ombudsman’s Annual Report for 2018-2019 noted 11,635 complaints about changing providers or establishing connections to the NBN, with the number of complaints rising from 6.7 per 1000 in the first half of the year to 8.6 in the second half.

Once connected, the complaints continued, with 23,362 complaints recorded about service quality.

In August the ACCC also flagged underperforming broadband as an issue, noting in its Measuring Broadband Australia report that 12.4 percent of consumers were continuing to experience underperforming services that rarely come close to reaching maximum plan speeds.

This week’s draft decision report says daily rebates for delayed connections should involve ‘a meaningful financial consequence for each delayed connection, providing a clear incentive for NBN Co to promptly resolve connection delays and minimise harm to end-users’.

With that in mind, the ACCC has suggested a connection rebate of $13.50 per business day for each missed connection service level, up to 20 business days.

Slow fixing of faults would see NBN charged $20 a day for the first five business days, then $30 a business day, up to a cap of 40 business days.

Rod Sims, ACCC chair, says it’s unusual for a monopoly telco network operator of NBN’s scale not to face regulated services standards.

Sims says the draft arrangements are designed to provide NBN Co with ‘more incentives’ to lift service standards to retail service providers, something Sims says should, in turn, improve service to consumers by reducing instances of missed appointments, delayed connections and unresolved faults.

“We have heard long-standing concerns from consumers about how frustrating, inconvenient and costly these issues can be,” Sims says, adding that there needs to be more action from NBN Co and RSPs.

NBN and RSPs are currently negotiating a new wholesale broadband agreement, setting out access to NBN’s wholesale service, and Sims says the ACCC’s proposal is expected to complement industry negotiations.

“These proposed regulated terms will establish baseline service standards, while allowing parties freedom to bargain on specific terms,” he says.

“We expect NBN Co and other service providers to identify more improvements that will benefit consumers.”

Feedback on the draft decision is open until 01 November.

NBN service quality complaints on the rise

Complaints about service quality, connections and migrations involving Australia’s National Broadband Network (NBN) rose in the first six months of 2019, despite complaints relating to the country’s broader telecommunications services falling overall during the year ending June.

This is according to the latest figures by the Telecommunications Industry Ombudsman (TIO). The TIO’s annual report for the financial year ending June 2019, released on 25 September, paints a picture of increasing complexity among the issues Australians are complaining about when it comes to their telecommunications services.

“Complaints about phone and internet services in Australia have continued their downward trend, and this is good news for consumers and the telecommunications industry, but this is only one part of the story,” said Ombudsman Judi Jones. “The volume of complaints coming back to us unresolved shows an emerging picture of complexity in technical and small business issues.

“Some measures we have taken to address this are the formation of specialist teams to handle these escalated complaints, and working closely with the phone and internet providers to better understand the barriers to resolving these issues,” she said.

According to the TIO, the 12 months from July 2018 to June 2019 saw 47 per cent of escalated complaints closed within 60 days, compared to 77 percent in FY2017-18.

The top five complaint issues about internet services were no action or delayed action by a service provider, with 13,976 complaints, service and equipment fees (13,509 complaints), slow data speed (8,668 complaints), intermittent service/dropouts (7,915) and delay establishing a service (7,431).

At the same time, the top five complaint issues about mobile services were service and equipment fees, with 12,905 complaints, no or delayed action by provider (11,675 complaints), resolution agreed but not met (4,263), misleading conduct when making a contract (3,656) and termination fees (2,975).

Altogether, the TIO received 132,387 complaints throughout the year, representing a year-on-year fall of 21 percent. However, for the first time, complaints relating to internet services exceeded those of mobile services, with 43,164 complaints – or 32.6 percent – and 40,103 complaints, respectively.

Complaints relating to services delivered via the NBN comprised a large portion of the total regarding internet services. According to the report, 23,362 complaints were recorded in FY2018-19 about service quality on the NBN. Complaints increased from 2.1 per 1,000 premises on the network in the first half of the year to 2.5 per 1,000 in the second half of the year.

Services delivered over the NBN were the subject of 48.2 percent of complaints about service quality during the 12-month period. By comparison, 40.4 percent of such complaints revolved around services delivered via other networks. Mobile networks accounted for 11.3 percent of complaints of this nature.

Meanwhile, 11,635 complaints were recorded in FY2018-19 about changing providers or establishing a connection to the NBN. Complaints increased from 6.7 per 1,000 premises added in the first half of the year, to 8.6 in the second half of the 12-month period.

Indeed, 56.4 percent of all complaints relating to connection and changing providers were about services delivered over the NBN. However, this comes as little surprise, given that, as the national broadband wholesaler draws closer to the completion of its rollout, more end consumers are being connected to the network.

“With transition to the NBN, providers offered a range of new products and services. As a result, we saw a new range of complaints and enquiries from consumers navigating the changed environment. The increase in complaints about internet services is one example of this,” the TIO report stated.

By comparison, such complaints involving services delivered via other networks accounted for 30.6 percent of the total, while mobile network services were at the centre of 13 percent of complaints about connection or changing providers.

Unsurprisingly, the country’s largest telecommunications player, Telstra, claimed the lion’s share of complaints, accounting for roughly 50.2 percent, although it should be noted that the company enjoyed a 19.5 percent fall in complaints from the previous year’s tally of 82,528.

Optus, as the country’s second largest telco, came in second, with 23.9 percent of the total. Like Telstra, Optus saw a fall in complaints against its name, enjoying a 22.2 decrease, year-on-year. Optus was followed by Vodafone, iiNet and TPG Internet, with 5.1 percent of the total, 4.3 percent and 4.1 percent, respectively. All experienced a year-on-year decrease.

“We are pleased to see that complaints decreased in every state, and for all of the providers listed in the report,” said John Stanton, CEO of telecommunications industry body, the Communications Alliance.

“There has been significant work over the past two years by Industry to improve the customer experience, including – but certainly not limited to – NBN Co and RSPs [retail service providers] achieving better communication and coordination for consumers and businesses as they migrate services to NBN-based networks,” he said.

NBN Co stands by CVC charges amid wholesale pricing overhaul

NBN Co has proposed a series of wholesale discounts and higher capacity inclusions across its products as part of its latest industry consultation round, but refuses to bow to telco pressure to drop its controversial connectivity virtual circuit (CVC) charge. 

The company behind the country’s National Broadband Network (NBN) released the second paper of its wholesale pricing review consultation with industry on 17 September, following twelve weeks of consultation with more than 50 NBN retail service providers (RSPs) and industry groups.

Among the big changes proposed by the network builder are wholesale discounts and higher capacity inclusions across its high-speed tiers. These include a 100/20 bundle discount starting with 3.75Mbps of included capacity at an effective charge of A$58 per month, as flagged at the beginning of the consultation process in June.

Additionally, the changes would include a 250/25 bundle discount starting with 4.75 Mbps of included capacity at an effective charge of A$68 per month, and an up to 1000/50 bundle discount starting with 5.75Mbps of included capacity at an effective charge of A$80 per month.

It should be noted that the 100/20Mbps Access Virtual Circuit (AVC) Traffic Class 4 (TC-4) proposal is being considered across all fixed line footprints, with ranged peak information rates (PIRs) being provided for the fibre-to-the-basement (FttB), fibre-to-the-curb (FttC) and fibre-to-the-node (FttN) network services.

The 250/25Mbps and the 1Gbps/50Mbps proposals are being considered for NBN Co’s fibre-to-the-premises (FttP) and hybrid fibre coaxial (HFC) footprints, while the feasibility of offering these tiers in the (FTTC) footprint is still being investigated.

According to NBN Co, the new 100/20 bundle discount is around 11 percent cheaper than the A$65 effective charge for the 100/40 bundle discount and the increase in CVC inclusion improves the total value by 20 percent. At the same time, the new 250/25 bundle discount is 32 percent cheaper than the A$100 effective charge for the 250/100 bundle discount.

The new up to 1000/50 bundle discount, meanwhile, 55 per cent cheaper than the previous A$180 effective charge for the 1000/400 bundle discount. Additionally, an almost doubling of the CVC inclusion to 5.75Mbps improves the total value by almost 68 per cent. 

For Ken Wallis, NBN Co general manager, commercial, these new high-speed tier offerings represent the biggest changes in NBN Co’s latest wholesale pricing proposals.

“We brought down the price, created the new 100/20 to 250/25 and the new up to 1Gbps/50Mbps so that they are at a much lower cost for RSPs to upsell,” Wallis told Telecom Times. “I feel this is the really big change here, and really opens up some greater opportunities for customers, as well as RSPs, in terms of their business cases as well.”

At the other end of the spectrum, NBN Co is planning to introduce a modified 12/1 Entry Level Bundle (mELB) discount on 1 October 2019.

Although the starting effective wholesale charge of A$22.50 and inclusion of 150Kbps (0.15Mbps) remains unchanged for voice only customers and those who use limited data, the additional charge that is applied when the average monthly peak usage across relevant services exceeds the included 150Kbps will be reduced from A$22.50 to A$5.70. 

This additional charge is proposed to be further reduced to A$4.90 in May 2020 and to A$4.10 in October 2020. There will also be the option of an additional CVC charge of A$8/Mbps to accommodate higher data users.

NBN Co is also proposing changes to its mid-tier offering. In an effort to deliver a more economically attractive 25/5 bundle discount to RSPs, the company is proposing to reduce the wholesale effective charge from A$45 (including 2Mbps of CVC) that exists today to A$37 (including 1.25Mbps of CVC) in November 2019, and to increase this capacity allocation to 1.5Mbps in May 2021.

Given that, according to NBN Co, 65 percent of end customers are currently subscribed to the 50/20 wholesale speed tier, the company is proposing to help RSPs improve their service experience by adding extra CVC inclusion to the ($45) 50/20 wholesale bundle discount, increasing from a CVC inclusion of 2Mbps today to 2.25Mbps in May 2020, 2.5Mbps in May 2021.

While NBN Co’s Pricing Review 2019 Consultation Paper 2 appears to have allowed for a series of discounts and other changes to appease the country’s telcos, the company has reiterated its commitment to retain its CVC charge model, despite ongoing criticism by a number of RSPs, most notably Telstra, NBN Co’s biggest retailer.

image (1)“While we know that some RSPs have called for the removal of CVC charges, the reality is that there is a real cost in provisioning and dimensioning the network to accommodate rising data consumption.,” said NBN Co chief customer officer, residential Brad Whitcomb.

“We believe our bundled charges are the fairest way to implement a user-pays approach to wholesale pricing at this time.”

As such, according to Whitcomb, NBN Co believes the higher CVC inclusions proposed in the paper strike the right balance between helping RSPs to develop affordable offerings for end customers, giving service providers a platform where they can compete, while also allowing NBN Co to generate a “fair and reasonable return” to invest back into the network.

However, in an effort to provide RSPs with additional certainty around CVC, NBN Co’s proposals see an increase in CVC across most wholesale bundles discounts and, for the first time, the company will begin publishing a rolling two-year roadmap of future pricing with incremental annual increases in capacity inclusions on most bundle discounts to meet customers’ growing data demand.

“This roadmap is an important step in showing service providers that we are listening and taking decisive action to provide greater certainty to the industry,” Whitcomb said.

NBN Co has also taken the prospect of differential pricing for video streaming, dubbed a ‘Netflix tax’ by some pundits, off the table. According to the company, the majority of respondents in the first round of consultation highlighted streaming video as an important application driving the need for higher download speeds and more data inclusions.

While the company investigated the possibility of lowering the price of video traffic by differentiating video traffic flows during the initial consultation, only two RSPs supported the proposed initiative, leaving NBN Co to instead focus on ways to meet the challenge of growing video traffic by increasing CVC inclusions and making higher speeds more affordable. 

Going forward, the network builder expects to conduct annual, industry-based consultations to review and refine bundle discounts and inclusions. For now, the company is calling on further feedback from RSPs on the proposals in the consultation paper.

The final outcomes of the wholesale pricing consultation are expected to be announced in November 2019.

BVivid coughs up A$25K over NBN cold-call tactics

Telecommunications provider BVivid has been hit by more than A$25,000 in penalties for making telemarketing calls that “likely misled” consumers transitioning to the National Broadband Network (NBN).

BVivid provides a number of telecommunications services to Australian businesses and individual consumers, including fixed phone, ADSL and NBN services.

According to the Australian Competition and Consumer Commission (ACCC), BVivid cold-called consumers from October 2017 to at least May 2018 and told them that their internet services would be disconnected or that they would lose their telephone number if they did not move to the NBN immediately.

The ACCC said that the company, through a wholly-owned subsidiary in India, employed staff in India to promote its services by unsolicited telephone marketing to prospective consumers in Australia.

In some cases, the representations made by the telemarketers prompted customers to transfer from their current telecommunications services provider to BVivid without understanding the full nature of the NBN migration process or the services they were signing up to.

“BVivid’s calls likely misled consumers and gave them a false sense of urgency and need,” said ACCC Commissioner Sarah Court. “Consumers generally have 18 months from when the NBN becomes available in their area to switch before being at risk of disconnection.”

After being issued with two infringement notices by the ACCC over the cold-calling conduct, the company has paid A$25,200 in penalties and has admitted to likely breached the Australian Consumer Law (ACL).

BVivid has also admitted that it likely breached the unsolicited consumer agreement protections in the ACL after providing services within the cooling-off period while failing to give customers a form they could use to terminate the contract.

“We are of the view that BVivid did not meet all their obligations to consumers who were subjected to their unsolicited marketing practices,” Court said.

“Consumers who find themselves signed up to a contract as a result of unsolicited marketing can cancel their contract without penalty within 10 business days of signing without needing to provide a reason,” she said.

According to the ACCC, the court enforceable undertaking it has accepted from BVivid in response to the action will also see the telco provide redress for customers affected by its conduct by allowing them to terminate their contract without penalty.

The undertaking will also see BVivid commission an independent review of all of its policies, practices and procedures relating to its sales and transfer methodology to ensure compliance with the ACL, among other measures.

Aborted mobile rollout leaves A$237m dent in TPG financials

TPG Telecom’s (ASX:TPM) aborted mobile network rollout plans have hit the telecommunications provider’s finances for the year to the tune of A$236.8 million.

The publicly-listed telco halted its mobile network rollout in January after the Australian Government banned the use of equipment made by Chinese telecommunications manufacturer Huawei – slated to be a key equipment supplier for the network – in Australian 5G networks.

In its preliminary financial report for the year ending July 2019, published on 5 September, TPG told shareholders that its decision to halt the rollout of its mobile network result in an impairment expense of $A236.8 million.

The scrapped rollout also led to an increase in amortisaton and interest expense related to mobile spectrum licences it bought to enable its mobile play, the company said.

The company’s results were also impacted by A$9 million in one-off transaction costs associated with its planned merger with Vodafone Hutchison Australia, which has been put on ice by the Australian competition watchdog.

On 30 August last year, TPG and Vodafone Hutchison Australia entered into an agreement to merge their two businesses and establish a combined entity that would boast both TPG’s fixed line infrastructure and Vodafone Australia’s mobile network.

However, the move was opposed by the Australian Competition and Consumer Commission (ACCC). TPG and Vodafone Australia subsequently launched legal proceedings in the Federal Court in a bid to have the decision reversed.

The case is set to be heard in the Federal Court from 10 September and wrap up within three weeks of that date. If the Court sides with TPG and Vodafone Australia, and the merger does eventually go ahead, the merged group will be listed on the Australian Securities Exchange (ASX) and renamed TPG Telecom Limited.

These factors, among others, contributed to a 56 percent tumble in TPG’s profit for the year, to A$175 million. The company’s preliminary reported earnings before interest, tax, depreciation and amortisation (EBITDA), meanwhile, came to $572.6 million, well short of the $A826.7 million it notched up the prior year.

However, TPG saw only a relatively minor 0.7 percent drop in revenue during the period, to nearly A$2.5 billion, although the company said that EBITDA continued to be adversely impacted by the loss of margin as DSL and home phone customers migrate to low margin National Broadband Network (NBN) services.

The effects of the NBN rollout are set to be felt for at least another year, with TPG telling shareholders that its 2020 financial year is expected to be the year that suffers the greatest impact from customer migration to the NBN. Indeed, the combined impact from residential DSL and home phone customers migrating to the NBN is expected to be around $85 million for the group.

TPG said that the annualisation of the deterioration of profitability of existing NBN customers experienced in the second half of the company’s 2019 financial year as a result of increased NBN wholesale cost per user is forecast to create a further NBN headwind for FY20 of approximately A$25 million.

It is anticipated that, by the end of FY20, TPG will have less than 15 percent of its residential broadband customer base remaining on ADSL, as more customers migrate to the NBN.

“Operating cost efficiency programs across the Group are expected to continue to deliver savings and another of growth is forecast for the Group’s Corporate Division but, in this peak year of NBN headwinds, organic growth for FY20 is not expected to be sufficient to offset the headwinds,” the company told shareholders.

NBN Co stretches break-even point to 2023

NBN Co has revealed that it does not expect to find itself in a cash flow positive state until at least Financial Year 2023, a year later than the National Broadband Network (NBN) builder’s previous estimates released last year.

According to NBN Co’s latest annual corporate plan, which outlines the company’s long-range plans, projections and estimates from 2020 to 2023, the national network builder expects to see about A$700 million in positive cash flow in FY23.

At the same time, NBN Co’s latest estimates forecast negative cash flows of roughly A$200 million in FY22. This stands in stark contrast with the company’s Corporate Plan 2019-22, released in 2018, which forecast positive cash flows of around A$100 million in FY22.

One of the reasons for the new break-even point comes down to a reduction in activation figures in FY20, FY21 and FY22. Indeed, the latest report’s expected activation tally in FY23 stands at 8.6 million, which is 100,000 less than the expected 8.7 million in FY22 that was estimated in the 2019-22 corporate plan last year.

In FY20, the company now anticipates 500,000 fewer activations than it expected in the 2019-22 corporate plan, reducing its target from 7.5 million total activations to 7.0 million premises that year.

“Given the complexity of build expected through FY20, there has been a shift in phasing  for activations in FY20 and through FY21. The Company expects to connect 8.1 million customers by 30 June 2021,” the latest corporate plan stated.

NBN Co said in its report that this reduction is “purely a timing issue” around deployment and activations, with the Ready to Connect footprint coming later during FY20 than originally forecast in the previous year’s plan. The company added that there is no expected material change to the underlying performance of the business and revenue is forecast to recover to expected levels in subsequent years.

Another contributing factor for the delayed break-even point for the network builder is an increase in expected capital expenditure (capex) in FY20, FY21 and FY22, compared to the previous year’s figures. For example, NBN Co’s latest report puts expected capex in FY20 at A$4.3 billion. In last year’s report, the figure for FY20 was closer to A$3.6 billion.

These changes, of course, are reflected in the company’s all-important average revenue per user (ARPU) figures which, in the latest plan, indicate it expects to see residential ARPU rise from A$44 in FY19 to A$49 in FY23.

download (5)In last year’s plan, the company put its ARPU expectation at A$51 by FY22 – a figure that included business customers as well as residential customers. The decision to take the business contingent out of the ARPU equation in this year’s report was, according to NBN Co CEO Stephen Rue, to provide a more meaningful and transparent number.

The change in ARPU expectations is reflected in the company’s latest total revenue estimates, which are forecast to reach A$5.9 billion in FY23. While the total revenue figure for FY22 remains unchanged from last year’s estimates, the expected A$5.2 billion in FY21 and A$3.9 billion in FY20 have been downgraded in the latest plan to A$4.9 billion and A$3.7 billion, respectively.

Revenue is forecast to grow from A$2.8 billion in FY19 to A$3.7 billion in FY20 with the expected delay – or “rephasing” as NBN Co puts it – in network activations. Meanwhile, the plan continues to support a peak funding forecast of A$51 billion.

Despite tacking on an additional year until it expects to see positive cash flow and the reduction of anticipated activations in FY20, NBN Co remains upbeat about the rollout and ultimately meeting its stated goals.

In its report, NBN Co said that by the end of FY20, 11.5 million homes and businesses will be on track to be able to order a service on the network, fulfilling the commitment to complete the build in 2020. Currently, around 86 percent of premises throughout Australia are able to order an NBN service.

“To date, NBN Co and its delivery partners have rolled out more than 280,000 kilometres of fibre-optic cable, repurposed and upgraded existing HFC [Hybrid Fibre-Coaxial] and copper technologies, built a Fixed Wireless network comprising some 2,200 towers and approximately 13,000 cells, and launched two satellites,” said Rue.

“With completion of the network well in sight, now is the time to focus on how Australians in homes and businesses across the nation can get the most out of the NBN access network.

“Improving customer experience and satisfaction will remain the key driver in coming years as we complete the transition to become a full-scale service delivery organisation – and we will put customers at the centre of everything we do.” he said.