New NBN pricing targets capacity woes, low take-up of high speed plans

New offerings bundle capacity in with access charge

NBN has unveiled new bundled services that it hopes will encourage retail service providers (RSPs) to sell higher speed National Broadband Network plans while also combating the under-provisioning of capacity.

To date, more than 80 per cent of end users on the new network have purchased 25 megabits per second (Mbps) or slower plans. NBN has previously argued that a “land grab” for market share has led to RSPs competing on price, not quality, of connection.

NBN offers four major speed tiers: 12/1Mbps, 25/5Mbps, 50/20Mbps and 100Mbps. Because RSPs are trying to capture early market share, NBN says that they have often sought to market only lower-speed plans to customers.

RSPs currently pay two major charges to NBN: AVC, which is a monthly charge based on the speed tier of each connection, and CVC, which is a charge based on the bandwidth provisioned by an RSP for its customers. Underprovisioning of CVC has been blamed for some of the speed problems encountered by end users.

NBN today unveiled three new products for retailers. New NBN 50 and NBN 100 bundles combine access charges with some capacity. The 50Mbps bundle includes 2Mbps of CVC, while the 100Mbps bundle includes 2.5Mbps of CVC. The new bundles will have wholesale charges of $45 a month and $65 a month, respectively.

The company said that the bundle pricing represents significant discounts compared to existing offerings. Currently, a 50Mbps service with 2Mbps of CVC would cost an average of $61 (for RSPs, CVC pricing varies depending on the ratio of CVC purchased to number of end users). Currently a 100Mbps and 2.5Mbps of CVC on average costs an RSP $72.

The third offering revealed today is a voice-only service with 50Kbps of data included, which NBN says is enough for a phone service. That offering costs $22 ($2 below the retailer’s cheapest 12/1Mbps plan).

On top of the bundled capacity, additional capacity is available at $8 for 1Mbps.

The CVC purchased for the new bundles will exist in a separate pool for retailers that offer both the new products and the company’s older, non-bundled products — and NBN has said that it will continue to support its legacy products.

For the legacy non-bundled products, the existing dimension-based discount scheme will continue to apply.

The DBD system offers increasing discounts for CVC as RSPs purchase more capacity per end user; the scheme was a previous attempt by NBN to encourage retailers to differentiate themselves by offering services less prone to congestion.

NBN’s new products follow two rounds of consultation with RSPs, with the company preparing for a third round ahead of the expected introduction of the new 50Mbps and 100Mbps bundles in the second quarter of 2018.

For technical reasons, the new voice-only service is unlikely to be implemented before the end of 2018 or the first quarter of 2019.

Ahead of the release of the new bundled products, NBN revealed plans to implement a transitional wholesale discount. The company is offering a 12-month discount on the wholesale pricing of its current 50Mbps service, cutting the effective AVC charge to the same price as a 25Mbps service. The discount will apply from today.

Today’s announcement comes as NBN deals with the fallout from the company pausing the activation of hybrid fibre-coaxial (HFC) services and major RSPs including Optus and Telstra being forced to compensate customers who signed up for NBN services with unachievable speeds.

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