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NBN’s new pricing model comes into effect to provide a ‘discount’ rate for big users

STARTING today, the way we are charged for our internet usage over the NBN will change — and it’s good news for data lovers.

STARTING today, the way many of us are charged for our internet usage will effectively change.

The company carrying out the task of building a wholesale broadband network to service every Australian has enacted a new pricing structure, designed to provide discounts for telcos (onsellers) who buy large amounts of bandwidth for their customers.

The altered pricing arrangement is designed to produce greater certainty and flexibility for retail service providers (RSPs) such as Telstra, Optus and TPG who sell home broadband plans to the end consumer.

On top of connection fees, NBN Co. charges retailers for the maximum amount of total bandwidth they want available to their customers accessing the network, known as the Connectivity Virtual Circuit (CVC) charge.

Under the new model, telcos will pay reduced prices for bandwidth on the NBN if they increase the average amount of data capacity in their customer base.

NBN Co. will calculate a discounted wholesale charge for each retailer service provider based on their average customer usage from the previous month. The higher the usage, the better the discount.

Previously it was based on an industry-wide average, meaning ISPs had less flexibility on the prices it charged to customers.

Initially priced at $20 per megabit per second, the CVC charge was cut to $15.25 in December last year. But it has been a huge point of contention with telcos claiming the significant cost was driving up prices and providing a disincentive to offer larger data plans.

The pricing change was announced in February and NBN Co. has maintained that prices will come down as more people join the network.

“We really committed to the retail market that we would decrease the price as consumption of the NBN — or usage of the NBN — increased,” Sarah Palmer, the company’s Executive General Manager for Product and Pricing told news.com.au.

In theory, the pricing “refinement” should result in “a bigger and greater range of plans” made available to consumers.

“Since we announced it back in February we’ve really seen the retailers start provisioning more and more capacity, leading up to today when the actual new discount comes into effect,” Ms Parker said.

The NBN is on track to be completed by 2020, the company says. Picture: Chris Higgins
The NBN is on track to be completed by 2020, the company says. Picture: Chris Higgins

Telstra has welcomed the change saying the NBN “has moved in the right direction” but warned it could adversely affect voice-only and low-use customers who could now be seen to provide less value for service providers.

“To sustain a healthy market, it’s not just price reductions that are important, but also how prices are lowered,” a Telstra spokesman told news.com.au.

“We believe the CVC pricing approach announced by NBN will not be good for voice-only and low-use customers — a group that includes the most vulnerable people in our society.”

The problem is it could provide a disincentive for ISPs to provide services to customers who only use small amounts of data or have voice-only plans.

Nevertheless, the new pricing structure will please telcos which had previously been very critical of the high cost of CVC.

In the long run it should mean as ISPs buy more network capacity on the NBN, customers could get better performance from their connection, particularly if they were suffering from slower speeds during peak times.

And it’s likely ISPs will increasingly offer top tier plans with better speeds and more data.

This week the NBN announced its network is now available to 5 million homes and businesses. According to the company it is scheduled to be three quarters built by mid-next year and on track to be completed by 2020.

Original URL: https://www.news.com.au/technology/online/internet/nbns-new-pricing-model-comes-into-effect-to-provide-a-discount-rate-for-big-users/news-story/3e4499892db36315a955538746ae79dc