Aussie Broadband boss says NBN Co should scrap CVC pricing

Internet service provider Aussie Broadband said NBN Co should scrap its much-maligned Connectivity Virtual Circuit (CVC) charging model.

CVC is a virtual charge placed by NBN Co help it set prices for bandwidth, and is part of the wholesale price the network provider charges retail service providers (RSPs) to get customers onto the network.

AussieBB managing director Phillip Britt said the network provider should move to a single access charge based on speed tiers as it would “simplify everything” and also give RSPs more certainty in how they can set prices.

“Many other countries operate this way, including New Zealand. CVC is something that appears to be unique to the Australian market,” Britt said.

“If it remains, I strongly believe we will soon be back to the early days of NBN when providers either skimped on CVC so customers experienced woeful peak hour speeds, or they had to charge prices higher than many customers were willing to pay, or they concentrated on customers who were not large users of bandwidth.”

“Alternatively, we will see telcos pushing customers even harder onto rival services, whether it be their own private networks or mobile. Something has to give.”

Britt also warned that either broadband prices will go up or the NBN’s service quality will decline once NBN’s offer of 40 percent free bandwidth expires next month.

He said Aussie Broadband has noticed its customers have settled into a pattern of using around 10 percent more bandwidth than originally predicted pre-COVID-19, and believes it reflects permanently changed behaviour.

“Not surprisingly, people have become used to using their internet for more things and on more devices – whether it be working and schooling from home, streaming entertainment or shopping online or anything else,” Britt said.

“NBN’s extra 40 percent CVC bandwidth to cope with peak demand during COVID certainly cushioned the impact, but once it’s gone, we don’t believe traffic levels will return to original forecasts even without areas of the country going in and out of lockdown.”

Britt adds that retail service providers (RSPs) like AussieBB are put in a difficult situation as they shoulder the cost of overage for CVC usage above the amount bundled into their NBN wholesale products.

RSPs will either need to raise retail prices to keep the service levels the same in peak time speeds, or lower peak time speeds to maintain at least some level of margin, which Britt said is “almost non-existent” as it is.

Britt added the free CVC offer during the COVID-19 restrictions was a “huge benefit” to the nation.

“l believe the NBN saved both retail providers and the nation by doing this,” he said. “Without this additional capacity, peak time speeds would have been significantly impacted.

“Most providers are still provisioning large amounts of CVC and when the offer finishes in mid-late August, they will need to adjust back. I believe this will have an impact on peak time speeds because there isn’t any more to give without raising retail prices.”

Britt added that even if NBN Co extends the offer, it would likely be just a band-aid solution to a deeper problem. He said that while COVID-19 has shown that the network is capable of delivering a solid reliable service, bandwidth usage is outgrowing predicted rates since NBN Co last updated its bundled CVC.

He said the next update isn’t until May 2021 and even then the amounts proposed will just cover the additional usage that’s already in place.