NBN to give RSPs discounts for heavy use customers

NBN will overhaul its broadband pricing structure and offer tiered discounts to its service provider partners that will scale as their purchased bandwidth increases.

The network builder first floated the idea last November, as a response to the long-criticised connectivity virtual circuit (CVC) charge retail service providers are levied to buy bandwidth on the NBN.

The expensive fee sees RSPs charged from a starting point of $17.50 per Mbps per month, which grows as traffic over the NBN increases. 

But RSPs argue the usage profile on the network has changed as a result of the huge popularity of streaming video-on-demand services like Netflix and Stan, making the CVC charge exorbitant.

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The criticisms led NBN to late last year reveal it was considering trialling a scaled discount fee structure for CVC for the next two years.

The trial would ascertain whether current market dynamics stick around long term and whether RSP forecasts of usage prove accurate.

NBN today said it had completed its consultation on the proposal and would push ahead with the new model starting June 1.

The dimension-based pricing structure will see tiers of CVC charges introduced based on expected usage, with the fees dropping as usage increases.

Current average usage levels across NBN RSPs - which show that most RSPs sit at the 700 kbps to 849 kbps tier - mean the majority of RSPs will see their CVC charges drop from $17.50 to $15.75, NBN said.

The most expensive speed tier - 0 to 399 kbps - will remain at $17.50.

The largest discount on offer is for the 1600 kbps and above tier, which is set at $11.50.

The network builder said average usage on the network had grown from 75 GB last February to 125 GB.

"All our customers and we at NBN have been seeing extreme data growth on our network, which is absolutely great," NBN product and pricing executive general manager Sarah Palmer said.

"We've got a great usage profile, and most of the commentary around it suggests it isn't going to stop soon."

The new fee structure will for now operate based on average usage across all of NBN's retail service provider partners, but NBN said there was the potential to tailor pricing to specific RSPs down the track.

"We're going to start this at industry level. We [previously] talked about applying this on an RSP by RSP basis but we've decided to implement it quickly and efficiently and have the discount underpinned by industry averages and let the industry drive the discount level over time," Palmer said.

"Over time we will try to move it to an RSP-led discount level" where the amount of bandwidth an RSP purchases is divided by its number of customers to find their average, Palmer said.

CVC charges make up a significant portion of NBN's revenue, delivering $51 million of the $164 million it reaped in its first half of fiscal 2016.

But Palmer said NBN was not concerned about the potential hit to revenue from lowering the charges.

"We're trying to get more customers on the NBN and for them to use it more, and to encourage a better experience," she said.

"Over the long time we think this will help our revenue becase customers will get on the network earlier and use it more."