NBN discounts ‘not enough’

NBN Co sticks with a charge that telcos want axed to make consumer prices affordable.

Rolling out the NBN. Picture: AAP

NBN Co is proposing deep discounts to the wholesale prices it charges telcos but has refused to remove a controversial charge that influences quality of service during peak times, despite protests from carriers who have also labelled the discounts inadequate.

While the company building the National Broadband Network is also ready to offer more capacity across its wholesale bundles, it said on Tuesday the connectivity virtual circuit charge, or CVC -- a capacity charge levied on telcos for connecting the NBN to their respective networks -- will have to stay.

The proposed changes would deliver telcos savings of up to $100 a month for the very top packages, but mid-tier retail packages will see savings of around $7 a month.

There are also changes to entry level plans with most savings around excess data usage. Most of the proposed pricing packages are designed to push customers onto higher capacity packages.

Telcos also have to pay NBN Co a set price to access the NBN and have consistently criticised the CVC charge as an artificial tax on capacity that hurts the quality of the services delivered to homes.

While telcos maintain the CVC charge is an artificial tax on capacity that forces that hurts the quality of the services delivered to homes, NBN Co’s chief customer officer for residential services, Brad Whitcomb, said CVC remains a vital piece of NBN Co’s business model.

“There still needs to be a way to allocate the very real cost of providing extra capacity on the network, and the AVC/CVC model is the fairest way to do that,” he told The Australian on Tuesday.

“While we know that some RSPs have called for the removal of CVC charges, the reality is that there is a real cost in provisioning and dimensioning the network to accommodate rising data consumption.”

The Morrison government expects the proposed changes to NBN wholesale charges to push internet prices lower, with Communications Minister Paul Fletcher saying half a million homes could be in line to receive more affordable broadband.

“We believe there is about 500,000 budget conscious households within the existing NBN footprint who right now are not taking the NBN because they don’t think it represents value for money for what they want to do,” Mr Fletcher said.

“If we can have more retail service providers offering a $60 a month retail priced plan with no monthly data download limit, we think that here’s a prospect of getting some of those 500,000 households to come onto the NBN.”

But the major telcos are not fully sold on NBN Co’s offer with Telstra and Vocus both saying that the discounts on offer don’t go far enough.

“We appreciate NBN Co is faced with financial constraints, however we continue to believe additional changes to wholesale pricing are urgently needed,” the telco said in its response.

Telstra, which has the lion’s share of the retail NBN market, had not only pushed for a $20 cut to wholesale prices and an end to the CVC charge but also the creation of a new $10 a month voice only plan to replace the entry level 12/1 plan.

“Unfortunately, the opportunity has been missed on affordability and simplicity, and it is unclear whether there will be changes on accessibility, and we’ll continue to make these points as part of the consultation process,” the telco said on Tuesday.

Meanwhile, Vocus boss Kevin Russel said that the proposed prices were more window dressing from NBN Co.

“The plans provided today have lower wholesale prices but also lower inclusions, so we will simply end up with the same penal pricing.”

Optus and Vodafone Hutchison Australia were more circumspect in their respective responses, with Optus’s head of regulatory affair Andrew Sheridan saying that the proposed pricing was a step in the right direction.

“However, more must be done with CVC capacity to drive improved customer experience particularly on the 50/20 bundle,” he said.

Meanwhile, Vodafone’s head of fixed broadband Mathew Lobb said NBN Co was closer to getting the balance right.

“The overall price restructure helps the entry level market and also encourages retailers to sell faster speeds.”

“However, given that the CVC arrangement still remains, there continues to be sustainability risks,” he added.

The changes put on the table by NBN Co will see it offer significant wholesale discounts and higher capacity inclusions across high-speed NBN wholesale offers, but upload speeds will be reduced.

“We have shifted the symmetry to prioritise download and the follow on benefit for us is that it reduces the capital cost to some degree and helps us support the more attractive prices.”

The new high-speed offers include, a 100Mbps download and 20 Mbps upload bundle as well as a 250/25 and a 1000/50 bundle.

The 100/20 bundle is $7 cheaper than the $65 charged by NBN Co for the 100/40 bundle and has 3.75Mbps of CVC included in it.

Meanwhile, the 250/25 bundle is $32 cheaper than the $100 effective charge for the existing 250/100 bundle discount. It will have 4.75Mbps of CVC included at a price point of $68 a month.

The 1000/50 bundle, priced at $80 a month, will have 5.75Mbps of included CVC and is $50 cheaper than the existing 500/200 bundle priced at $130.

There are also changes on offer for entry level NBN plans, the modified 12/1 bundle, which comes into play from October, will keep the wholesale charge at $22.50 with 150 kilobytes of CVC included. However, telcos will have to pay less if a consumer uses up their 150 kbps data quota, with price paid for excess usage cut from $22.50 to $5.70.

“This will offer RSPs the flexibility to develop and market affordable 12/1 broadband plans with either capped or uncapped data inclusions,” Mr Whitcomb said.

A final decision on the pricing is expected to land in November.

NBN Co’s Brad Whitcomb.