Nextgen partners face 50% price hike as NBN connect service shuttered

Nextgen Networks is telling resellers to find a new supplier for NBN virtual connections within two weeks or face a 50 percent price hike.

The company has stopped taking new connection orders for the virtual connect product after claiming technical changes to be introduced by NBN Co would force it to spend big to change its infrastructure.

Nextgen became the first to offer sub-wholesale products on the NBN in 2011. Its “NBN Connect” product suite offered retail service providers the fibre backhaul to connect Nextgen's 90 national points of presence in data centres across the country with NBN Co's planned 121 points of interconnect.

But in a recent letter to RSP partners, sighted by CRN, Nextgen advised it would no longer process any new connection orders for the product, and would additionally hike the price of existing NBN virtual connect services by 50 percent from the start of February next year.

It claimed recent "architectural and technical design changes" made by NBN Co to the network had meant Nextgen would need to make a "significant investment" to introduce "technology changes" across its own infrastructure.

“[As a result], we will not be processing any new connection orders effective immediately as we develop our plans for the NBN Virtual Connect business. This also applies to orders placed but not yet provisioned," the company advised.

A spokesperson for Nextgen told iTnews the company had considered its design options and had "unfortunately" come to the conclusion that prices would need to be increased for existing services.

NBN Co declined to provide detail on the specific technical changes that will come into effect in January, but iTnews understands the company is performing minor system upgrades to its UNI-V ports.

A spokesperson said only that the company was "implementing an upgrade to the network to improve functionality and performance".

Nextgen is pushing customers to churn off its virtual connect services to an "alternative supplier" by waiving early termination fees for those who move off by 1 December.

"We fully understand the commercial impact to customers and have offered to support those who have elected to migrate to alternate service providers," a spokesperson said.

"In doing so, we have also waived exit and termination fees in each of the service contracts so that customers can enjoy the added flexibility in selecting the most appropriate solution for their business."

CRN spoke to a number of retail service providers, who said they weren't surprised by the move.

Tony Dunphy, managing director of Melbourne-based TelAustralia, said: "We were reselling Nextgen NBN for a while but the writing was on the wall from late 2013 that they were not putting any resources into the product. Lots of [points of interconnect] not available and slow to respond to issues and no new products coming on."

TelAustralia has moved to Telstra. 'We pay a bit more but the support's there, all POIs available and business-grade products first-quarter 2015. Moving the last handful of customers off Nextgen in the next month."

Stavros Patiniotis, managing director of EscapeNet, said his company had been migrating off Nextgen anyway. "It's pretty safe to assume that they don't want to do it anymore and the 50 percent increase is a not-so direct way of saying that."

A spokesperson from Friendly NBN in Kiama echoed this, saying that the NBN costs were just part of the story. "Their excuse is that with the compliance that the ISP have to do by January, their costs will balloon. I accept that to a degree, but my opinion is they went in too cheap in the first place."

Friendly NBN has switched to Melbourne-based virtual connection provider MyAggregator.

Rafael Soler from MyAggregator told CRN: "It is a very fierce industry. Companies like us are working on volume and that is where we see the industry heading. At the end of the day, charging extreme overheads for this service is not sustainable anymore. Our business model is to make little money out of one connection but have a high volume of connections."