TELCON11: Vodafone boss: Crown fibre retail margin untenable

Crown Fibre retail pricing, as reported, is untenable, Vodafone chief executive Russell Stanners told the TelCon11 conference in Auckland today.

Mr Stanners said Vodafone won't be retailing UFB if margins are as low as the media has been saying. His company couldn't cover its costs.

Stirring words, but Vodafone customers can relax.

Vodafone has signed on as one of 13 Crown Fibre retailers named so far (each of which will buy ultrafast broadband access from Local Fibre Company wholesalers, yet to be named in most regions).

The wholesale pricing published by Crown Fibre Holdings so far looks pretty tasty – and the Commerce Commission (18%) and Communications Minister Steven Joyce (20%) have talked about relatively slim margins on top.

A $35.50 a month for a consumer plan that offers 30Mbit/s download speed (that is, about three times faster than most people get today from a copper DSL line) and 10Mbit/s upload.

Add an 18% margin and GST, and you get $47.50 a month.

The next consumer plan up the Crown Fibre food chain offers a phone line, plus IPTV (television over broadband) service for $38.75 wholesale, or $52.60 retail.

That’s mouth-wateringly cheap. Right now, most people pay in the region of $60 to $80 for a home phone line plus broadband – and Sky TV on top of course costs more.

To get a 100Mbit/s download, 50Mbit/s upload fibre plan, householders will have to pay around $75 a month.

A premium business plan would cost $600 a month under Crown Fibre Holdings template pricing, for 1Gbit/s speed up or down (meaning you could send a 1000MB file in eight seconds).

That qualifier
Yet Mr Stanner’s qualifier “as reported” is the operative phrase here.

The wholesale pricing published so far does not include some major whammy’s including:

• Data caps. It’s quite possible, for example, that a Crown Fibre retailer, like Vodafone, attaches a relatively modest monthly allowance – say 10GB – to the entry-level consumer plans. To get a more realist cap, you might have to pay 25% or 50% or 100% more.
• International data. Much – and in many cases most – of the data Kiwis download is hosted overseas. Expect another big whack for that.
• Retailers can also add margin for sundries such as billing expeneses.

Retailers will not be able to go hog wild with pricing. Although Local Fibre Companies will hold local (regulated) monopolies in their region, there will be competition at retail, and no doubt the minister will be leaning on some of the contenders a little.

But there’s also still plenty of scope for all telcos, and ISPs, to skim a lot of cream off the top.

Probably. The truth is that for all the published template pricing, and leaked documents, we have no clue what the final pricing mix will look like.