NBN Models Flat-Rate Prices But There’s A Catch

NBN Co has modelled a flat-rate wholesale pricing structure for each of its speed tiers. This is amidst calls from retail service providers to abandon the contentious variable charge for bandwidth—Connectivity Virtual Circuit (CVC)—where the more the users browse the Internet, the more CVC a retailer has to buy. 

The CVC charge, which covers the number of bandwidth telcos make available to their users, has long been called out by the telco industry. This has driven Internet prices higher, eating into their profit margins if RSPs try to subsidise part of the fluctuations. 

The network has briefly acknowledged the requests from major telcos in Australia to instead be charged a flat price per user connected to the nbn™. 

“Some RSPs have specifically raised their concerns with CVC, particularly in an environment of high usage growth, and expressed a desire to move to AVC only pricing,” it said in its February consultation paper.

AVC, short for Aggregated Virtual Circuit, is the fixed component of its existing wholesale pricing. However, it warns that while an AVC-only flat-price structure is possible, it will have to cover the cost of lost CVC revenue, thus be set at a level that will allow them to maintain economic feasibility and have enough money left to reinvest in the network. 

NBN Has Yet to Share Flat-Rate Pricing Model to RSPs 

The network has yet to release the simple flat-rate pricing model to Internet providers, which according to NBN Chief Customer Officer Brad Whitcomb still has to be tailored to each retailer.

“I do not believe we have provided the retailers with a mathematical model to that extent, no,” he said in a statement. 

“We have 65 primary retailers, they all have different profiles in terms of what their customers are consuming, what they think is going to happen in the future, the speed tiers that they’re on etc. so there is no blanket,” he added. 

NBN deems that there’s not a specific model yet that would apply to all RSPs. But, the network is confident that it will eventually arrive at a flat wholesale price structure that would enable them to meet future revenue and average revenue per user (ARPU) goals. In the meantime, the proposed model needs further work before it is shareable with the industry.