NBN Co today revealed it would offer ISP customers a rebate on pricing for its Connectivity Virtual Circuit (CVC) capacity links to end customers premises, in what appeared to be an attempt to address persistent criticism of its pricing model from outspoken telco executives such as Internode managing director Simon Hackett.
Hackett has consistently criticised NBN Co’s CVC pricing over the past six months, arguing that it was “insane” and warning that no small ISPs would survive their walk through the “valley of death” transition from the current copper network to the fibre future envisioned by the Federal Government, if they wanted to maintain their spots as national providers.
According to Hackett, the cost of that CVC circuit, which essentially delivers traffic to customers’ premises, had been too high – stating it should come down dramatically. Instead, NBN Co should charge more per month for each individual customer connection (known as the Access Virtual Circuit), Hackett had said.
NBN Co has previously responded to Hackett’s criticism by attempting to explain its model further. However, in a statement published this afternoon, the company said it now planned to “rebate” its charges for the first 150Mbps per month served to ISPs through the CVC connection until there were 30,000 premises passed in what it described as “a connectivity serving area” — which connects to one of its planned 121 points of interconnect.
According to the company’s statement, ISPs will still pay the same AVC charges — which start at $24 per month per customer. However, the CVC charges will be rebated “to assist a smoother transition to fibre services for service providers”.
“This move is aimed at lowering the barriers to entry for [retail service providers],” said NBN Co head of product development and sales Jim Hassell, “and we expect it to promote retail competition and service innovation, leading to flow-on benefits for consumers. The rebate will give service providers a lower-cost opportunity to enter a geographic area, and build their customer base in the early days.”
“In making this announcement, we have listened to our customers — the service providers — and taken on board what they have said in order to improve our wholesale service offer, and further facilitate their transition to the National Broadband Network. It is designed to promote the early entry of service providers to any given area by lowering the initial cost of providing services over the NBN.”
In the statement distributed by NBN Co, Hackett praised the deal as “a positive outcome” that has resulted from “constructive interaction” between NBN Co and the industry on pricing.
“Our shared interest is in seeing engagement with NBN Co from as many RSPs as possible, to ensure the maximum competitive benefit from the network to consumers around Australia,” said Hackett. “This change encourages participation from RSPs by making it viable to offer sustainable services at appropriate performance levels until the addressable market in each service area is large enough for fully self-supporting service delivery.”
In the same statement, iiNet chief technology officer Greg Bader also praised the deal.
“One of the cost challenges in migrating to the NBN is utilisation efficiencies during the rollout phase of the network,” he said. “The transitional CVC pricing is a good idea and will help retail service providers in the period between launch and the time it takes to reach scale in the network.”
Image credit: D. Sharon Pruitt, royalty free
Wait did NBNco change something?!?!? How can this be?!?!?!? According to the anti-NBN crusaders nothing in the business plan can change because “this is NBNco’s pricing policy” My life is in disarray now.
*charging*
*clear*
— flatline —
*charging*
*clear*
beep…beep beep…beep beep…
About time. Hopefully it’s enough.
So what does this do to Node’s prices?
Valid question, and one I will be inviting @simonhackett to answer.
you gotta love the fun and games of Labor’s “make-it-up-as-you-go-along” NBN.
assuming that the $50bln NBN is built to completion and taxpayers get all of their money back, two things are inevitable:
1/ access charges, which are presently set at artificially-low levels (commensurate w/ a highly-depreciated copper network) to lure consumers onto fibre, will eventually have to rise sharply. of course, this is best done when the vast majority of broadband subscribers are already locked into super-expensive fibre, and all competing alternative networks shutdown;
2/ since wholesale access costs are (at least) double under the NBN, putative RSPs on the fibre platform will have to wring out as much savings as possible in retail cost components to maximise broadband affordability — i.e. further industry rationalisation is inevitable. prior to the latest pricing adjustments, one would have thought that CVC provisioning would be a key trigger for further subscriber base consolidation.
the 150Mbit transitional CVC subsidy merely provides a temporary reprieve for small ISPs — the eventual expiry of the subsidy means that the imperative to become a “big player” in order to survive is still very much in force. (and, logically, there can only be a few “big players” in the NBN end-game.)
viewed from another perspective, it actually makes a lot of sense to implement transitional CVC arrangements — if you believe that the NBN will get scrapped eventually, the “CVC holiday” serves as a temporary bridge over an indefinite period of policy uncertainty by offering small ISPs an extended window of survival without partaking in consolidation.
of course, this small reprieve must be viewed in the context of other major challenges for small players on the NBN. there are still plenty of other “overheads” in the system, e.g. equipment at POI, backhaul from 121 POIs, etc.
all up, just another day of “pray and delay” and “extend and pretend” in this grand national delusion that a “$50bln NBN” (and counting) is affordable for a tiny nation of 5mln fixed broadband subscribers.
What is also incredible is that all these on-the-fly changes to wholesale charging to placate ISP’s has no effect on the NBN Budget calculations and the original revenue predictions on which the original charging regime was based.
“However, the CVC charges will be rebated “to assist a smoother transition to fibre services for service providers”.
Amazing.
pardon my forwardness, but i think you’re suffering from a big misconception in this respect. NBNco’s business or funding model is actually very simple and uncomplicated.
in Year X, they get allocated $Ybln from the Federal Government. they lay as much fibre as possible with that $Ybln. in Year X+1, they get allocated $Zbln. again, they lay as much fibre as possible with that $Zbln. and so, on and on it goes….
until the Australian taxpayer finally wakes up and realises that the Labor Government’s pouring billions upon billions of precious tax revenue down a drain.
actual subscriber revenue is just an “afterthought” in the NBNco business model. (my sources tell me that Jean Passskaaaal-Booooossskay borrowed NBNco’s funding model from the Greeks.)
So you guys have an issue with NBNCo actively engaging with industry and modifying policies according to that interaction which Simon himself states:
““Our shared interest is in seeing engagement with NBN Co from as many RSPs as possible, to ensure the maximum competitive benefit from the network to consumers around Australia,” said Hackett. “This change encourages participation from RSPs by making it viable to offer sustainable services at appropriate performance levels until the addressable market in each service area is large enough for fully self-supporting service delivery.”
Oh that’s right. You’re operating under the delusion that no changes get made to nationwide projects, no matter how big, because the need for consistency in the details is greater than obtaining the most benefit from the solution.
ROFL
@Murdoch
“because the need for consistency in the details is greater than obtaining the most benefit from the solution.”
So what was the benefit from this latest ‘solution’ Murdoch?
‘CVC rebate won’t change Internode’s NBN prices’
ROFL is right.
What was the benefit?
Didn’t you read it?
Simon Hackett:
“This change encourages participation from RSPs by making it viable to offer sustainable services at appropriate performance levels until the addressable market in each service area is large enough for fully self-supporting service delivery
I was looking for a better value outcome for the punter buying a NBN plan, sorry my mistake.
Yep, you did mistake it. Remember, the NBN last mile infrastructure not only improves connections across Australia, but fixes the currently tilted market structure. If that market needs a helping hand at the start, why not?
Even the capitalists in here couldn’t argue with that one.
@ Murdoch
This conciliatory move by NBNCo (exactly as they said they would if need be initially, but the pessimists wouldn’t listen) proves that NBNCo are trying to look after Australians and comms, whether the pessimists agree with the NBN or not.
It also proves Simon is there to look after Internode and profits and keep prices as high as possible within reason. That’s what businesses do.
In the end, it’s just a continuation of NBNCo is damned if they do and damned if they don’t, in some people’s eyes.
“In the end, it’s just a continuation of NBNCo is damned if they do and damned if they don’t, in some people’s eyes.”
Precisely. As with most nebulous arguments which includes politics, the point can be argued both ways. When even the Opposition is stating that they won’t “rip up” the NBN, there must be more value leaving it in, than trashing it. Just that observation alone should be telling.
Abbott trades in hysteria, as do some other’s in here. Turnbull is a better, more reasoned politician, that’s skillset is plainly obvious because his reasoning comes about despite his party leader’s hysterical hand wringing.
However, that’s water under the bridge. The NBN is going ahead, at least as far as the next election. All the hand wringing over perceived negatives doesn’t shout down the 2 overwhelming positives:
1. It provides a set standard of ubiquitous connectivity across Australia, and across multiple technology platforms as a starting point.
2. The method used to obtain it is so far affordable.
Now, while others in this thread would love to counter the 2nd, let me ask you this (I’ve asked this in WP several times, never received an answer):
What was the deficit last year, and the year before?
Despite Mr Abbott’s “we’ll all be ‘rooned”, we are returning to surplus. We can afford it.
Still, suspicious people will always find what they’re looking for, whether it’s there or not.
I wonder what the fall in revenue will entail for NBNCo
Worst case scenario:
Cost of 150mbit CVC * no of RSP’s * 121
Of course that assumes all RSP’s will connect to all 121 POI’s, which clearly won’t be the case. Many of the smaller national players will use a wholesale aggregator, and regional ISP’s will only connect to a handful of POI’s in their area.
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