NBN sees potential for more pricing changes

Most RSPs believe NBN’s pricing scheme is “heading in the right direction,” chief customer officer says

NBN is continuing to explore opportunities for changes to its pricing model, the company’s chief customer officer, John Simon, told a Senate Estimates hearing yesterday.

The company recently revamped one of the key charges it levies on retail service providers (RSPs). (As a network wholesaler, NBN’s customers are RSPs rather than end users on the National Broadband Network.)

One of the key sources of income for NBN is the Connectivity Virtual Circuit (CVC) charge: A monthly charge for RSPs based on shared end user capacity they purchase from NBN. Telcos have complained that the charge has placed pressure on their margins. In addition to CVC, RSPs pay a per-end-user access fee.

In February, NBN announced changes to its CVC discount scheme in an effort to combat under-provisioning by RSPs, which has been blamed for some end user performance problems, and to provide price certainty for telcos.

The new ‘Dimension-Based Discount’ model cut CVC pricing depending on the average bandwidth provisioned per end user by an RSP. The discount scheme is an evolution of an earlier change to NBN’s pricing model, which cut CVC pricing based the industry average capacity provisioned per end user (as opposed to the individual RSP based discount of the new model).

Most RSPs believe NBN’s pricing scheme is “heading in the right direction,” Simon said. “Like all commercial organisations, they would probably like to see bigger discounts or bigger price drops but we need to manage the objectives that we’ve all got, both as a wholesaler and a retailer and also importantly for the end user.”

“We are going to explore additional options,” Simon told the Estimates hearing. “The model that we have is the model that was originally put into the NBN from the onset,” the NBN executive said.

NBN will be “reviewing whether the ongoing industry growth in data usage, which we do assume will continue, whether there are some better methodologies and better pricing schemes to put in place and we’re going to explore that this year and we’ll go back to our customers, the RSPs, and have that consultation with them.”

“We do think that there are other options available,” Simon added.

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