NBN cuts entry-level broadband prices, nixes differential pricing for video

New bundles for high-speed services proposed in second-round of pricing consultation

Credit: NBN Co

NBN Co has detailed a price cut for entry-level broadband services that could make it more economical for retail service providers (RSPs) to offer ADSL-equivalent plans.

The company said it planned to shave at least $16.80 off the additional monthly charge levied on entry-level services once an extremely low usage threshold is passed.

NBN Co in June launched an industry consultation on its wholesale broadband pricing, with the company indicating it wanted to encourage the take-up of higher speed services as well as make NBN services more attractive to low-income households.

The company today revealed it had launched a second round of consultation, with NBN Co indicating it would move to quickly cut the wholesale pricing of low-end broadband services.

The company has a complex pricing structure for its entry-level 12Mbps services. A basic service with 150Kbps of included capacity has an effective wholesale price of $22.50. That can be used to serve households that are only interested in voice services or that have very low data needs.

However, if the average monthly peak CVC (capacity) usage for entry-level services exceeds 150Kbps, an RSP incurs an additional charge. On top of that, RSPs have to purchase the extra capacity necessary to serve those users.

In a discussion paper released to RSPs, NBN Co said it would cut the additional usage charge for entry-level services from $22.50 to $5.70. The company said that in response to industry expressing “an urgent need for continuity of ADSL-equivalent services” it would implement a partial waiver to give effect to the changes from 1 October.

Previously an entry-level service with a 500Kbps of capacity would cost an RSP $47.80 a month; with the changes it will be $31 (assuming additional CVC charged at $8 per Mbps). An entry-level service with a 1Mbps of capacity will now cost $35, compared to $51.30 a month.

NBN Co said it intended to cut the additional usage charge further to $4.90 in May 2020 and $4.10 in October 2020.

Earlier this year the Australian Competition and Consumer Commission chair, Rod Sims, expressed alarm about the affordability of the NBN for lower income households. Because of NBN Co’s charges, the cost for an RSP to supply a 12Mbps was close to the cost of a 50Mbps service, Sims said. Low-speed NBN plans offered to new customers were, in some cases, at least $10 per month higher than equivalent plans on the ADSL network, he said.

“In this regard, what would help in addressing our concerns would be for NBN Co to revisit its entry-level bundle offer, or introduce a new offer, so that there is healthy competition at the $60 price point for the supply of an unlimited NBN broadband plan with busy hour speeds that compare favourably to what was available on ADSL,” Sims said in a speech delivered in April.

NBN Co said that during its first round consultation, most respondents “supported the development of lower priced wholesale 100Mbps, 250Mbps and 1Gbps TC-4 peak information rate product tiers”. (TC-4 or Traffic Class 4 is NBN Co’s standard broadband service.)

NBN Co revealed today that it is proposing three new high-speed products:

• A 100/20Mbps bundle that includes 3.75Mbps of CVC at an effective wholesale charge of $58 per month.

• A 250/25Mbps bundle with 4.75Mbps of CVC for $68 per month.

• A 1000/50Mbps bundle with 5.75Mbps of included CVC for $80 per month.

The three charges represent discounts on NBN Co’s current offerings. The $80 charge for 1000/50Mbps represents a $100 cut from the current effective charge.

“The introduction of an affordable, new 1000/50 bundled discount is a game-changer for the industry and an exciting innovation for data-hungry customers,” NBN Co’s chief customer officer residential, Brad Whitcomb, said in a statement.

“We have taken action to improve industry certainty by increasing CVC (capacity) across most wholesale bundles discounts and, for the first time ever, we’ve announced that we will be publishing a rolling two-year roadmap of future pricing with incremental annual increases in capacity inclusions on most bundle discounts to meet customers’ growing data demand,” Whitcomb said.

While the 100/20Mbps bundle is being considered for all NBN Co’s fixed-line technologies (although a wholesale speed range will be provided for services that rely on copper, such as FTTB, FTTC and FTTN), the 250/25Mbps and 1000/50Mbps tiers are expected to only be offered on FTTP, HFC and, possibly, FTTC.

NBN Co said it would also dump a controversial proposal that could have seen differential pricing for video streaming traffic across its network.

“The majority of respondents in the first round of consultation highlighted streaming video as an important application driving the need for higher download speeds and more data inclusions,” the new consultation paper states.

“While nbn investigated the possibility of lowering the price of video traffic by differentiating video traffic flows during the initial consultation, only two RSPs supported the proposed initiative. nbn has therefore elected to focus on ways to meet the challenge of growing video traffic by increasing CVC inclusions and making higher speeds more affordable.”

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