NBN overhauls CVC pricing model

The new tiered discount model will come into effect June 1

NBN has announced a new discount model for its controversial connectivity virtual circuit (CVC) charge, heeding calls from ISPs that original pricing was unsustainable.

Instead of a volume-based discount scheme for the CVC, NBN will offer a tiered series of increasing discounts based on capacity per end user, known as a ‘dimension-based discount.'

The new tiered discount model could see rates reduced to $11.50 per Mbps of traffic, depending on the average CVC bandwidth that industry provides to all end users. CVC costs will be calculated on a quarterly basis, with the more CVC bandwidth provisioned per end user, the bigger the CVC pricing discount available to the industry.

The change comes following six weeks of industry consultation, and aims to reward retailers with a discount (determined at an industry level) for delivering a better customer experience through the better allocation of CVC to end users.

The CVC is a capacity-based pricing scheme that is based on the shared bandwidth provisioned by ISP customers. ISPs also pay access charges when they sell services over the NBN.

Previously, retail ISPs had criticised the CVC, noting that the service would become impossible for retail ISPs and end user broadband customers to afford as broadband usage is anticipated to grow.

Since February 2015, average usage on the NBN network has increased from 75 gigabytes to 125 gigabytes, presenting challenges to retailers like Telstra, TPG and Optus.

The discount model is intended to remain in place up to two years, but will be reviewed on an ongoing basis in conjunction with our customers, NBN said.

In addition to the scalable CVC option, NBN co also levies the access virtual circuit (ASV), which involves a flat rate per customer.

“We know increased usage has presented challenges to our retailers, and we have consulted with them on a new CVC pricing model that creates greater flexibility and opportunity for the industry – acknowledging that broadband use is expanding,” NBN CEO, Bill Morrow said in a statement.

Morrow said that the NBN company planned to evolve the DBD model to eventually be applied directly to each individual retailer rather than a one size fits all industry application.

“The model aims to encourage our retail providers to better dimension their network, and help retailers to provide a better broadband experience for homes and businesses,” he said.