NBN’s new discount scheme kicks in

Retail service providers to receive individual discount on NBN’s capacity charge

NBN’s revamped discount scheme for its capacity-based Connectivity Virtual Circuit (CVC) charge begins today.

The company in February said it would push ahead with the new discount model, which offers retail service providers (RSPs) individual discounts based on the ratio of average CVC purchased to number of end users.

The CVC is one of the key charges levied on RSPs. RSPs are also charged a per-end-user access fee.

CVC is a monthly charge sold in 100 megabits per second blocks; total CVC purchased is shared among an individual RSP’s customers (or the customers of RSPs purchasing connectivity via a wholesaler).

At the same time last year NBN introduced the first iteration of its ‘dimension-based discount’ (DBD) scheme. The initial DBD scheme worked on an industry average of capacity purchased to total end users on the National Broadband Network.

Both discount schemes employ the same basic mechanism: The more capacity purchased per end user, the lower the CVC pricing.

After the first DBD scheme was introduced, CVC pricing dropped from $17.50 to $15.75 and then hit $15.25 in December. Currently under the new scheme, CVC could potentially drop to $8. (The first version of the DBD system topped out at 1500+ kbps per end user, cutting CVC pricing to $11.50.)

The basic aim of both versions of the discounting scheme is the same: To encourage RSPs to purchase adequate capacity per end user.

“The new discount model is good news for both retailers and consumers. It is encouraging to see retailers embrace the new model and work with NBN to improve the consumer experience,” NBN executive general manager for product pricing, Sarah Palmer, said in a statement released this morning.

“It will encourage the supply of more bandwidth for consumers at home and at work, leading to a better internet experience overall.

“It will also deliver greater forward price certainty to retailers, allowing them to better manage their cost base, and support usage growth on the NBN network.”

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