nbn™ to cut the charges ISPs pay for traffic

In theory this should mean ISPs offer faster plans for fewer dollars

nbn™, the company building and operating Australia's National Broadband Network (NBN), has announced changes to the network capacity charge (CVC) it charges internet service providers.

The CVC is important because it's one of two costs nbn™ imposes on ISPs. The first is the monthly access charge (AVC), a per-month-per-subscriber fee that is broadly analogous to a line rental fee, albeit with some variability for different bandwidths. The CVC is rather more complex and covers the amount of bandwidth a retailer will consume within each of the NBN's Connectivity Serving Areas.

Retail ISPs have long argued that the CVC is too high, for two reasons.

Firstly, it's not cheap. By the time an ISP pays CVC and AVC there's not much change left from $50. Punters are generally happy paying not much more than that for basic internet services, leaving ISPs to find a way to run the service at a profit.

Secondly, CVCs have been calculated on industry-wide averages. Small ISPs with few customers have therefore ground their teeth as average costs reflecting the far larger user populations of big ISPs dragged costs way beyond their own.

Critics say the effect of averaged CVC pricing is that ISPs can't make a profit on packages offering fast speeds. Prices therefore remain high, sometimes higher than comparable ADSL plans. That, it's claimed, means punters are in no rush to move from ADSL to the NBN, crimping adoption rates and depriving nbn™ of the revenue assumed in its business plan

nbn™ has been aware of ISPs' gripes for ages, so dropped CVC prices twice in the last year. But the industry kept grumbling, especially about averaging. So nbn™'s just decided that as of June 1st, 2017, it will adopt a new model that sets CVC fees by dividing the amount of bandwidth each buys by the number of customers it serves.

“The changes we are making provide a discount, and a bigger discount as usage grows on the network,” nbn™'s executive general manager of pricing, Sarah Palmer told a conference call for media today. They'll also mean that a retailer can keep tabs on their own usage of the NBN, figure out what that will cost under the new model and price accordingly.

“What consumers should see is when a retailer has cost certainty they have a lot more flexibility to make different offers because they understand what their costs are,” Palmer said.

We'll know if this plan works if ISPs offer new products as of June 1st. Watch this space. ®

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