NBN Co is exploring possible alternatives to its current bundle discount for National Broadband Network (NBN) Access Virtual Circuit (AVC) and Connectivity Virtual Circuit (CVC) charges as it launches a fresh round of industry consultation on its wholesale pricing.
The AVC and CVC charge, respectively, serve as an access charge based on speed tier and capacity charge for retail services providers (RSPs) that sell NBN services to end customers.
NBN Co periodically consults with industry on its wholesale pricing. This year’s consultation follows the completion of its Wholesale Pricing Review in November 2019, which resulted in the introduction of some wholesale pricing discounts and additional data inclusions, the introduction of national CVC pooling, new higher speed tiers and the creation of a two-year Bundles Discount roadmap.
For this round, more than 50 internet retailers and consumer advocacy groups, such as the Australian Communications Consumer Action Network (ACCAN), have been invited to participate in the consultation.
On 15 February, NBN Co released its Pricing Review 2021 Consultation Paper 1, which it claimed seeks to deliver value, certainty and simplicity to the telecommunication industry and customers.
Along with reviewing the current bundle discount for AVC and CVC charges, the consultation paper also calls for feedback on proposed wholesale discounts and data inclusions in the two-year Bundles Discount roadmap to April 2023, solutions for a long-term low-income offer and repositioning the original higher speed tiers to meet the future needs of business customers.
Part A of the new consultation paper sees NBN Co call for feedback on extending the two-year Bundles Discount roadmap by a further 12 months from May 2022 to April 2023.
NBN Co had previously committed to providing a two-year Bundles Discount Roadmap, which led to wholesale discounts and data inclusions introduced across all speed tiers from May 2020 to April 2022.
“In May 2021, we will be proceeding with the planned higher data inclusions for the 50/20 Mbps, 25/5 Mbps speed tiers and Wireless Plus Bundles, which will range from 11 per cent to 20 per cent of additional capacity at no extra cost to retailers,” NBN Co chief customer officer Brad Whitcomb said.
“On 1 December 2020, we brought forward significant additional data inclusions for selected higher speed tiers to meet the data demands of customers at that time,” he added.
In the 2022-23 roadmap, NBN Co is exploring two options. The first option proposes maintaining the bundles' discount effective charge across all wholesale speed tiers at the May 2021 levels and increasing CVC capacity inclusions by between 0.10 Mbps to 0.50 Mbps in May 2022 at no extra cost to retailers.
The second option, meanwhile, proposes "rebalancing" the CVC charges for the 50Mbps and faster bundles by increasing the AVC charge by $2.00 but providing up to an additional $2.80 worth of CVC inclusions over and above the inclusions proposed in the first option.
This is effectively a 17 per cent to 29 per cent discount for the additional CVC inclusions, NBN Co claimed.
“We believe both options deliver the industry real choice in managing future data demand,” Whitcomb said.
Part A of the paper also seeks feedback on repositioning the original higher wholesale speed tiers of 250/100 Mbps; 500/200 Mbps and close to 1000/400 Mbps under the TC4 Bundles Discount to better serve small and medium-sized businesses, according to NBN Co.
To achieve this, NBN Co said it is proposing to maintain the bundle discount effective charge for the 250/100 Mbps wholesale speed tier, mainly used by small businesses, at $100 and increase the associated CVC inclusions from 3.5Mbps to 5.5Mbps in May 2022.
For the 500/200Mbps and close to 1000/400Mbps wholesale speed tiers, NBN Co is proposing to increase the CVC inclusions and provide more business-related benefits in return for a $30 and $50, respectively, effective charge increase in May 2022.
The company said it expects to finalise and announce the outcomes of all the items in Part A of the paper by 30 April.
In Part B of the new consultation paper, NBN Co explores a number of longer-term strategic options to continue to evolve its wholesale pricing, with a range of potential “alternative constructs” as part of its efforts to deliver a “fair and commercially sustainable framework”.
However, the company said that changes to its pricing constructs may require further engagement with regulators before they are implemented.
In particular, the company is seeking comment from the industry on solutions for a long-term low-income offer, which further builds on industry engagement on this matter to date.
Just days before the release of the new consultation paper, NBN Co published its latest half-yearly financial results, with CEO Stephen Rue flagging that the company was on track to enjoy positive full-year earnings before tax, interest, depreciation and amortisation (EBITDA) for the first time, despite pledging additional capacity and retailer discounts last year.