ACCC to scrutinise telcos’ deceptive NBN advertising

The Australian, August 22, 2017

The competition watchdog has launched tough new guidelines to tackle “extremely poor” advertising by telcos spruiking National Broadband Network packages that fail to deliver promised speeds during peak times.

Responding to reports in The Australian of widespread overselling of NBN connections, Australian Competition & Consumer Commission chairman Rod Sims yesterday said telcos would be ­requested to advertise “typical minimum speeds” during peak times, rather than misleading “up to” speeds.

“This is a very unusual step for us, we are being prescriptive and we aren’t usually,” Mr Sims said. “We are seeking to change the game here. Advertising standards are extremely poor.”

Most telcos advertise “up to” speeds, selling packages of 12 megabits per second, 25Mbps, 50Mbps and 100Mbps. Regardless of those advertised packages, however, speeds for many users are falling to as low as 1Mbps and 2Mbps during peak times from 6pm-11pm on weeknights.

A key reason for telcos advertising those “up to” speeds is ­because they are required to buy 12Mbps, 25Mbps, 50Mbps or 100Mbps connections for each user from NBN Co, which is a wholesaler. Those connections are known as “AVC” charges.

However, telcos are also ­required to buy “bandwidth” — known as a CVC charge — but ­because of the high price of building the $49 billion project, NBN Co has set high prices for bandwidth and most telcos are failing to buy enough, leading to speeds plummeting during peak times.

Mr Sims said the advertising guidelines would be voluntary but he expected the vast majority of telcos to follow them and the ACCC had the option of taking legal ­action, or of requesting legislative changes, if they failed to do so. He said the ACCC was currently investigating “all the major players” over their NBN advertisements.

The federal government has come under pressure to fix problems with the NBN, after it was revealed many users were obtaining the same, or slower, speeds than they were pre-NBN.

To cut back on costs, the Coalition moved from expensive fibre-to-the-home connections to fibre-to-the-node which connect fibre to local “nodes” with the last leg connecting homes via existing copper lines.

Until recently the debate over NBN speeds centred on claims from lobby groups FTTN connections were to blame for slow speeds. However, the failure of telcos to buy adequate bandwidth is why speeds are very slow during peak times.

FTTN connections average 70Mbps — and have a targeted minimum of 25Mbps — but 83 per cent of users are buying packages of just 12Mbps and 25Mbps.

Mr Sims said telcos would be required to take 56 speed tests and use the “third-lowest one” when advertising minimum speeds.

“When people are moving to the NBN they expect to be getting something better but they are getting something that is no better, or in fact what they are getting is worse,” Mr Sims said.

“It is a voluntary guide but we will be calling it out if (telcos) are not advertising properly.”

The extent of action taken by ACCC against telcos that breach the advertising guidelines will be closely watched, with the watchdog previously criticised for publicly calling for telcos to cease advertising “up to” speeds for several years but failing to take ­action against a single operator.

Mr Sims said the ACCC had “a lot of consultation” with industry and he was “confident at least some of them” would follow the new guidelines.

The federal government is understood to have concerns over consumer dissatisfaction with the NBN, with complaints expected to surge as the rollout hits the major cities and existing, reliable Telstra and Optus internet connections are forcibly replaced with patchier NBN services.