The new CVC pricing structure follows a six-week industry-wide consultation and nbn CEO, Bill Morrow, says it aims to continue to provide retail service providers with cost certainty of nbn’s pricing structure.
Morrow says the new model, planned to be introduced in June, and known as dimension based discount (DBD), responds to the rapid increase in data consumption by Australian consumers 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 broadband market is changing and consumption continues to boom. We have seen average usage on the nbn network increase from 75 gigabytes in February 2015 to 125 gigabytes today.
The new discount-based model is calculated on the average CVC bandwidth assigned by all retailers to all end users on the nbn network at an industry level – the more CVC bandwidth provisioned per end user, the bigger the CVC pricing discount available to the industry.
The level of discount applied to the standard CVC unit price will be calculated on a quarterly basis and will be available equally to all nbn wholesale customers, regardless of size, and aims to encourage retail providers to deliver a higher quality service. The calculation and application of the discount will exclude satellite.
“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,” Morrow said.
“We do not plan to stop here. We see the DBD model evolving further and ideally being applied directly to each retailer rather than an industry level. We will continue to evolve it in close consultation with our customers.”
In a briefing this week, Sarah Palmer, executive general manager of NBN Product and Pricing, said that with the CVC discount pricing starting at an industry level, the discount would basically be underpinned by what the industry is using.
“We've decided to implement it quickly and effectively for the benefit to be realised by the industry, and then let the industry drive it,” Palmer noted. “We’ll let the industry drive where the discount level needs to be over the period of time.
“It will be about a $1.75 drop (in the CVC price) on the first day, but it might be a bit more because we are seeing every month that capacity goes up and the assessment right now is where industry is at for a 1 June implementation.
“There's complete transparency of where it will go at what usage, rather than me giving a price decrease each year, and over time we will try to move it to an RSP-led and level discount.
"It’s an effective discount 1 June. The industry will drive where it needs to go rather than me giving a price, and over time we will try and move it to an RSP level, an RSP led and discount.”