Small businesses ‘lose money on NBN switch’

The Australian, July 19, 2017

The Council of Small Business Australia says its members are frustrated and “shocked” with slow connections and poor service under the National Broadband Network, with the problems causing many businesses to suffer substantial losses.

The comments come as a top telco analyst says some NBN providers appear to be building business models based on the expectation the federal government will write down billions of dollars from the value of the network, meaning it will recover less of its investment to make way for faster and cheaper net speeds.

The small-business council’s chief executive, Peter Strong, said what the public was told about the NBN was “not the reality” and slow speeds hampered many businesses. “When people think NBN, they think fast internet but then they sign up and find they are getting slower speeds than they were before,” he said. “We were told it would be so fast it would shock us. It has shocked us but not because it’s fast.”

Mr Strong said members had also reported problems with drop-outs and patchy service.

“Four hours’ downtime could be so much money; it could also mean you’ve lost that customer you’ve been waiting for,” he said.

As revealed by The Australian yesterday, millions of Australians will see internet speeds fall when they are moved to the NBN, despite paying the same access fees.

NBN Co levies hefty “bandwidth” charges on telcos so the NBN can remain financially ­viable to provide a return on the federal government’s investment in the project and to repay debt.

NBN Co has confirmed these bandwidth charges are a key ­driver of slower internet connections. The federal government has a $29.5 billion equity investment in the NBN, on which it seeks a ­return of one percentage point above the long-run inflation rate. This year it also loaned NBN Co $19.5bn.

However, because these bandwidth (CVC) charges are so high, telcos are buying the minimum, resulting in NBN speeds plummeting during peak times such as weekday evenings.

Ian Martin, a telecommunications analyst with New Street ­Research, said telcos Dodo and TPG were offering monthly NBN packages for $29.90 and $29.99 a month respectively, when such connections should cost almost $50 after including the NBN’s access fee of about $24 a month, bandwidth charges and the telcos’ own costs of business.

Those very low prices suggested Dodo and TPG were not only making aggressive “land grabs” but were expecting future NBN costs to fall, a result of the federal government’s writing down the value of the network. “I would say the government making a writedown is written into some business plans,” Mr Martin said. Dodo declined to comment yesterday and TPG could not be reached.

Asked whether the government was considering writedowns on its NBN investment, Communications Minister Mitch Fifield said the government’s investment could be written down only “in accordance with the requirements of accounting standards”.

“These standards require there to be evidence that the investment should be written down and do not allow this to be done at the government’s discretion,” he said.

The NBN problems stem from the former Labor government, which locked in the hefty bandwidth fees as a way of making the project appear financially viable and able to deliver a return.

As reported by The Australian yesterday, customers of the major telcos, including Telstra, Optus and TPG, have been flooding the websites of those companies with complaints of slow NBN connections. Several complainants have reported buying 100 megabits per second plans but achieving peak time speeds of just 1/100th of that.

On Sky News Business program Ticky last night, Telstra chairman John Mullen said there was “definitely a problem across the entire industry” with NBN speeds.

Asked whether consumers who bought 100 Mbps packages could expect to achieve those download speeds, he said: “I think that’s what the whole industry is working on right now, visibility.’’

The NBN rollout has been one of the most expensive, if not the most expensive, in the world, with the New Zealand broadband network — which does not charge bandwidth fees — delivering far faster and cheaper services.

In Australia, peak 100 Mbps connections are sold by retailers for $100 a month. In New Zealand, one gigabit per second connections — 10 times faster than Australia’s peak 100 Mbps service — sell for $NZ129.95 ($121).

The Landor Group operates offices in Sydney and Melbourne, and, under the brand Designworks, operates in Auckland and Wellington in New Zealand.

Designworks group technology manager Daz Jensen said his company, a media and technology company, dealt with terabytes of data. The group had a 1 Gbps connection in New Zealand, allowing workers to easily move data between its offices. But when it was shared with its Australian offices, which ran at up to just 100Mbs, workers hit serious “bottlenecks”.

By contrast, Kerry Beilken of the Perth suburb of Osborne Park, said her business The Upholstery Shop had lost thousands of dollars since moving to the NBN in February. She said a bungle after a technician came to connect her meant Telstra thought she had the NBN but she was not connected.

“In 14 weeks I had 14 technicians come out and not one of them gave me an answer,” she said. “The mental toll it has taken, I have cried and yelled. It has pushed me to the point where after I waited four hours, I got off the phone, picked up something, and threw it.”