The company responsible for building Australia’s national broadband network, nbn, has changed its pricing model of its Connectivity Virtual Circuit (CVC) charge to calculate a discount based on individual retailer averages, as opposed to an industry average.
As of 1 June, 2016, a discount will be given to retailers based on volume divided by number of customers from individual resellers such as Telstra, Optus, and TPG.
nbn executive general manager of pricing, Sarah Palmer, said the organisation has been collaborating with resellers on pricing for the past two years and the new pricing model is a result of those negotiations.
On 1 June 2016, nbn introduced a discount for resellers based upon total usage of the network. The new model changes that discount structure to a reseller-based model which provides a discount based on individual reseller usage divided by the number of customers.
Palmer said this will provide more certainty and predictability of pricing in order to better plan for future uptake and set pricing for consumers.
“By better managing their cost base, [retail service providers] have a lot more flexibility to create a whole range of retail plans and packages that will give more choice and can suit a greater range, cohort, and segment of customers."
Palmer said the company has worked to refine those discounts somewhat to line up with the work it has done with the industry on usage.
“We have taken on-board feedback from our customers that the discounts could be more forward-looking and more discounts happen as more usage happens. They are slightly deeper discounts and there are more of them as we work down to an $8 per megabit price point."
The company described the change in pricing as “the next step in the evolution of the dimension based discount (DBD) pricing mechanism” and “follows an extensive consultation period with nbn’s customers, the retailer service providers.”
“Our aim is to achieve better outcomes for end users, RSPs and nbn by providing a more direct link between an individual retailer’s dimensioning and unit price,” nbn chief customer officer, John Simon, said.
“We have worked closely with industry in order to make sure we are delivering a range of competitive broadband services for all Australians. Today’s announcement is another step in helping us create value and competition in the market," he said.
The new model applies the discount on a monthly basis across all technologies, except satellite.
Palmer said satellite was exempt from the new pricing model as the delivery method had a different capacity management program due to the finite capacity of the technology.
nbn CEO, Bill Morrow, said his comments that demand for 1Gbps speeds was almost insignificant were taken out of context by reporters as he was refering to demand amongst RSPs and not end-users.
“I was asked last week by the media about the need for Gbps speeds in Australia. These are lines that are 40 times faster than plans based on our most popular 25Mbps wholesale service," Morrow said in a statement, published on 15 February.
“The fact is nbn already offers a wholesale 1Gbps product to retail service providers – which RSPs can make available to more than 1.5 million homes, and has been on sale for around four years.
“Currently, there are no retail 1Gbps speed plans on offer from the retailers. This is, in our opinion, because there is still minimal consumer demand for these ultra-fast speeds – especially at the prices retailers would have to charge for them,” he said.
Palmer did not say the new pricing was intended specifically to encourage uptake of nbn’s higher speed services, but to give its resellers better certainty in pricing and thus bring more competitive pricing to consumers and encourage increased usage on the network.