NBN mulls capacity charge revamp

Morrow announces tariff review

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Along with its quarterly results announcement yesterday, nbnTM has hinted to the industry that its CVC charges could fall again.

The connectivity virtual circuit (CVC), currently AU$17.50 per megabit per second, per month, is a large part of the National Broadband Network (NBN) wholesale package that retail service providers (RSPs) need to pay to reach customers.

RSPs also pay a fixed fee for a bundle consisting of customer access (the Access Virtual Circuit, AVC) and the User Network Interface (UNI).

The CVC is contentious because it means RSPs have to balance capacity against two complex factors: how much they expect customers to use in practice, and how much backhaul they need from the 121 NBN points of presence back to their own infrastructure.

With the company's Q1 results out of the way, nbnTM CEO Bill Morrow has told the major dailies that the company is going to set up a review into how its tariff structures work.

One factor that's driven the review is the arrival of Netflix in Australia, which threw RSPs' network scaling assumptions into disarray. Long experience that informed backbone contention ratios (for example, “10 Mbps of customer package can be served by 2 Mbps of network capacity”) no longer applies when everybody on a DSLAM (or in an NBN service area) is streaming movies at the same time.

Earlier this year, iiNet's then-boss David Buckingham said broadband in the Netflix era had a bad mismatch with the CVC model.

Morrow wouldn't commit to when or if a new tariff will be proposed, telling the Sydney Morning Herald and The Australian options won't hit the table until early 2016.

The trick, for nbnTM, is to make-over its tariff book without spoiling the average revenue per user (ARPU) growth it needs to one day become profitable.

A revised tariff structure would need sign-off by the Australian Competition and Consumer Commission. ®

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