NBN Co bends to RSP calls for revamped fees

NBN Co will move its contentious broadband pricing structure for retail service providers to an individualised model, following complaints about its previous industry-wide approach.

Last June NBN Co announced it would undertake a two-year trial of a tiered discount model for the long-criticised connectivity virtual circuit (CVC) charge RSPs pay for bandwidth.

Until then RSPs had been forced to pay a flat $17.50 per Mbps per month, regardless of how much they bought, resulting in the underprovisioning of CVC to avoid the high costs that would come with providing end users higher quota plans.

The discount model offered CVC pricing ranging from $11.50 for the most volume purchased to $17.50 for the least.

But while applauding NBN Co for making some movement on CVC, the network builder's resellers argued the changes didn't go far enough.

NBN Co's decision to base the tiered fee structure on average usage across the industry would "hamstring" some RSPs by judging them on other NBN resellers' approaches, they claimed.

The network builder at the time indicated it would consider moving to a model tailored to each individual RSP down the track, and last October confirmed the change would likely arrive in early 2017.

It today said the new tailored approach will come into effect on June 1. It applies to all NBN technologies except satellite.

The individualised model sees an RSP's purchased bandwidth divided by its number of customers to find its average, reducing the price of CVC as the average amount of CVC per end user increases.

The network builder said the tiered pricing model meant CVC in some cases now went down to as low as $8 per Mbps.

1Gbps?

Earlier this month NBN Co admitted more customers would need to take up plans above 25Mbps for it to achieve its goal of $5 billion per year in revenue by 2020.

But NBN Co CEO Bill Morrow claimed there was no demand from consumers for a 1Gbps high-speed service.

“We have roughly a million and a half homes that can have the technology to give a 1Gbps capability today,” Morrow said last week.

“We have a product that we can offer the retailers should they want to sell it. A couple of retailers have signed up to our trial base where they’re looking at what a 1Gbps service might look like but they have chosen not to offer it consumers.

“I presume there isn’t that big a demand out there for them to actually develop a product to sell to those end users.”

NBN Co executive general manager of pricing Sarah Palmer today said the tweaked CVC pricing model would support greater usage on the network.

"We know consumers use around 30 percent more on the NBN than they do on legacy networks, which is probably related somewhat to the faster speeds they can get on the network," she said.

"I'm hoping this will give RSPs the flexibility to offer a range of plans, including really high-speed plans."