Broad industry support for NBN pricing revamp, Bill Morrow says

NBN reports 148 per cent revenue growth for first quarter of FY17

NBN CEO Bill Morrow says there is “broad-based support” among National Broadband Network retail service providers (RSP) for a shift to a modified discount scheme for the capacity-based CVC charge.

The CVC — Connectivity Virtual Circuit — is a per megabit per second capacity charge that NBN levies on RSPs and is a key component of NBN’s income. NBN has in the past blamed CVC under-provisioning by some RSPs for speed problems encountered by end users.

“We are engaging with our retailers at the moment about an evolved discounting structure that allows them to differentiate from each other,” Morrow said today during a briefing on NBN’s Q1 results.

“The conversations are going well and there is broad-based support for a new discount-based scheme based on the retailer average of CVC per end user,” the CEO said during the briefing covering the quarter ending 30 September 2016.

“We will update the market on the next steps when we complete this consultation.”

Earlier this year NBN implemented a CVC discount scheme based on the total CVC provisioning per end user by RSPs. The new scheme will see that discount move to a per RSP basis, with CVC prices dropping the more capacity is provisioned per user. The intent is to ease the financial burden on RSPs and reduce under-provisioning.

Morrow said today that “another adjustment needed in the industry” is educating consumers about the different speed tiers available on the NBN.

“We are hearing many stories that people are unaware of their purchased speed tier, let alone what else was available,” the CEO said. “As we educate end users about what they need to do to switch to the NBN, we’re also explaining that they have a variety of speeds that they can ask their retailer about.

“Our website will outline speed tiers with a helpful assessment tool at the point of checking when their home can be connected to the NBN network.”

At the end of the quarter just over half the premises with fixed-line NBN connections were using 25/5Mbps connections; the next most popular speed tier was 12/1Mbps (31 per cent of premises), followed by 50/20Mbps (4 per cent). Some 13 per cent of premises with active NBN connections had 100/40Mbps connections (and 1 per cent of premises had 25/10Mbps connections).

Revenue growth

NBN reported revenue of $181 million for the Q1, up 148 per cent on Q1 FY16.

If subscriber costs are excluded, NBN’s EBITDA loss for the three months to 30 September hit $501 million (compared to a loss of $336 million for the quarter ending 30 September 2015).

Premises able to order an NBN service grew to 3.23 million, up from 1.38 million in the comparative quarter. Premises with active NBN services reached 1.38 million at the end of the quarter, up 126 per cent from Q1 FY16.

NBN ended the quarter with 3.23 million premises ready for service (that is, able to order an NBN-based broadband service).

There were 927 million premises connected via fibre to the node and fibre to the basement, 1.4 million able to order a fibre to the premises service, 416,000 connected via fixed wireless and 416,000 premises via satellite.

Some 28,000 premises in the hybrid fibre-coaxial (HFC) footprint were ready for service at the end of September. During the quarter, NBN announced that it had decided to largely scrap the plan to use Optus HFC assets.

Instead, the bulk of premises in the Optus HFC footprint will be connected via fibre to the curb (FTCC — also described as fibre to the distribution point or FTTdp). NBN made the decision because the cost per premise of connecting homes using the Optus HFC network made it an unattractive proposition.

“Essentially the advancement in FTTC technology made it commercially and operationally more attractive for these areas,” Morrow said today.

“This decision is the most recent example of our technology agnostic approach. It will give us a great opportunity to refine this new technology and hopefully see it play a more prominent role in the multi technology mix.”

NBN has pushed ahead with the use of Telstra’s HFC assets, however, and the technology “remains a significant and vital part of our network,” Morrow said.

During the quarter NBN signed agreements with six construction firms for work on HFC. Those construction partners will be managed by Telstra under a $1.6 billion agreement signed in April.

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