NBN Co fixing CVC by forcing RSPs to buy bandwidth with every new user

NBN Co have announced dramatic changes to the way the NBN is charged at the wholesale level. These changes are a firm smack down for the RSPs that have...

Img credit: nbnco.com.au

NBN Co have announced dramatic changes to the way the NBN is charged at the wholesale level. These changes are a firm smack down for the RSPs that have oversold their networks which unsurprisingly has created end-user dramas across the country.

These new changes will see, for the first time, NBN Co bundle access and bandwidth charges for its higher speed plans together, as one. The company plans to introduce a new nbn 50 wholesale bundle charged at $45 a month with 2Mbps of bandwidth included and a new nbn 100 wholesale bundle at $65 a month with 2.5Mbps capacity included.

Previously RSPs would buy new connections to the network as new customers joined, but the RSPs could effectively choose how much bandwidth they would buy, despite having well established average consumption data, they regularly bought less than was required.

Having a static access charge and a fluid capacity charge, made up a two-part pricing model that had seen some retailers under-provision bandwidth, which was impacting end user speeds during peak download times. Come the second quarter of 2018, when this new process is implemented, that’ll be a thing of the past (at least for new customers).

To ensure the connections will include enough bandwidth (and probably a bit of a punishment for doing it wrong and damaging the NBN brand), NBN Co are setting the bandwidth included with each new connection to include nearly double the current average capacity being purchased by retailers across all nbn fixed line services today.

The changes are expected to also result in significant savings for NBN Co’s wholesale customers with the new nbn 50 bundle representing a potential discount of 27% while the nbn 100 bundle could save retailers 10% when compared to current average prices across the industry.

Included bandwidth on these new packages is just the minimum, meaning retailers can continue to purchase additional capacity as demand increases for $8 per megabit per second per month, a 40% reduction.

Discounts on its top-tier internet access plans, is a move that is designed to deliver significant savings for its wholesale customers and allow them to improve broadband speeds and service for end users.

NBN Co Chief Executive, Bill Morrow, said:

“Today, more than 80 per cent of end users are on plans based on the nbn 25 wholesale speed tier or lower but we want all Australians to experience the benefits of fast broadband and the economic growth, job creation, and social inclusion that it unlocks.

Combining access and bandwidth charges into one simple price point will not only promote the take-up of plans based on higher wholesale speed tiers and position the nbn 50 bundle as our flagship service, but it will also trigger the triple benefit of improved end user experiences, provide more affordable pricing options for retailers and support NBN Co’s revenues in the longer term.”

Until the new pricing structure goes live and to help transition retailers to the new pricing options, NBN Co is also introducing a promotion that will see the nbn 50 wholesale service sold for the same access price as the nbn 25 service with a boost of 50 per cent additional bandwidth. Ok that’s massive and lets hope this wholesaling makes it to retailer offerings.

Now for the fine print..

The immediate wholesale discount is designed to allow end users to experience faster speeds at a similar cost to what they are paying today for up to 12 months from the date their provider moves them to the new plan. Phone and internet providers will decide the retail price of the plans and will not be able to offer the promotion on nbn powered Fixed Wireless or Sky Muster plans.

While these new plans are designed to help promote the take-up of higher speeds, NBN Co has also announced plans to introduce a lower cost of entry-level wholesale bundle to ensure retailers committed to voice-only and basic broadband access customers are not left behind.

The new voice-only and low usage access plans will come with an included 50kbps of data, which is enough to cover a basic telephony service. This means retailers servicing telephone-only and basic internet users can purchase the new nbn 12 bundle for a wholesale charge of just $22 per month, which represents a potential discount of around 8 % on the current entry-level plan.

NBN Co’s existing pricing options will continue to be available for internet and phone providers who prefer this model and to also allow a smooth migration for those who choose to progressively move their customers over to the new bundles.

One issue with today’s announcement, is that it doesn’t do anything to address the issues of existing customers (the ones complaining now), just new customers. Its possible over years that new contract renewals are also required to come with a minimum amount of bandwidth per user, but the good news, there’s starting to be rules around RSPs behaviour when selling the network. Until now its been fast and loose and that’s resulting in a number of RSPs like Telstra and Optus being forced to repay users after findings by the ACCC that they sold services of speeds not technically possible of achieving to some customers.

This also isn’t the first time NBN have changed their wholesale pricing and is likely to change again in the future, with the last change as recent as June this year.

Despite its issues, the project is reported to still be expected to complete by 2020. Read more about the pricing options on the nbn blog.

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Creator of techAU, Jason has spent the dozen+ years covering technology in Australia and around the world. Bringing a background in multimedia and passion for technology to the job, Cartwright delivers detailed product reviews, event coverage and industry news on a daily basis.
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