NBN to trial discounts for ISPs with heavy users

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NBN to trial discounts for ISPs with heavy users

Exclusive: Testing a change to contentious pricing model.

NBN will trial offering tiered discounts to service providers as the bandwidth they purchase for customers increases, in a revamp of its much-maligned broadband pricing structure.

The network builder earlier this month revealed it would launch a six-week inquiry looking at how to cut the fees it charges internet service providers to buy bandwidth on the NBN.

Telecommunications companies have long criticised the company's expensive connectivity virtual circuit (CVC) charge.

The CVC charge starts at $17.50 per Mbps per month and increases as traffic over the NBN grows - a concern for ISPs as streaming services like Netflix boom in popularity.

The charge is in addition to the static access virtual circuit (AVC) and user network interface (UNI) monthly fees.

In a document sent to ISPs and sighted by iTnews, NBN revealed it will embark on a two-year trial of scaled discounts for service providers.

These dimension-based discounts would start at $0.50 for up to 400kbps per end user and range in eight tiers up to a discount of $6 for above 1500kbps per end user - making the lowest-charge CVC $11.50 per month.

Dimension-based pricing removes a set charge for Mbps per month in favour of tiers of CVC charges based on expected usage.

NBN said the average monthly download per end user on the fibre network had risen 45 percent from 73GB per month to 106GB per month since March.

"The launch of streaming video on demand services (e.g. Netflix, Stan and Presto) has seen changes to the usage profile on the NBN network," NBN said in the document.

"Although it is uncertain whether these effects will amount to a one-off step change or the start of an ongoing trend, NBN recognises the need to take into account current (and emerging) market dynamics in implementing NBN’s long term pricing approach."

The proposed start date for the trial is April 1 and it will run for two years. The price tiers will only be available in areas where the NBN rollout is complete. It will be offered to all wholesale providers across the NBN's technology mix but will not include voice-only services.

After 12 months of the trial, NBN will review whether industry usage forecasts had proven accurate; whether service provider behaviours had changed during the trial; whether the quality of broadband provided on the NBN had changed; and whether any new service providers had connected to the NBN to service niche areas.

"After the 24 month trial period, if the trial has been successful, NBN will consider extending the dimension-based discounts and potentially adjust the tiers," it told RSPs.

"However, if the trial is deemed unsuccessful, NBN may choose to revert to a linear CVC price, or may choose to consider implementing another CVC pricing mechanism."

An NBN spokesperson told iTnews the trial was aimed at allowing RSPs to provide better broadband for customers.

"The model aims to provide retail service provider confidence by giving price certainty of the next 2 years," they said.

"Importantly, the model is non-discriminatory in that it is calculated on the average dimensioning of CVC per end user and not related to the volume of purchase of CVC."

A spokesperson for the Competitive Carriers Coalition said while the ISP group welcomed a rethink on the CVC issue, it was disappointed NBN had not distributed the document widely to the industry.
 
'This pricing issue has been a huge topic of discussion and affects every access seeker and every fixed line consumer. Many people have contributed to this long running consultation process and NBN should have simply published this on its website so everyone could see and consider it," the spokesperson said 
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