CVC rebate won’t change Internode’s NBN prices

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Internode has confirmed it won’t update its National Broadband Network pricing following a deal with NBN Co on a rebate on pricing for its Connectivity Virtual Circuit capacity links, with the ISP’s managing director Simon Hackett noting the rebate had already been taken into account when the prices were set.

The ISP has been a loud and vocal critic of NBN Co’s wholesale pricing on its services, with Hackett arguing 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.

After what appeared to be lengthy talks on the matter, yesterday NBN Co sought to address the concerns by offering ISPs a rebate on the CVC links which provision traffic to end user customers’ premises on the NBN. ISPs won’t have to pay the CVC charges on the first 150Mbps per month served through the CVC connection until there are 30,000 premises passed in an area connected to one of its planned 121 point of interconnect.

Hackett welcomed the move in a statement by NBN Co yesterday. However, in a separate email, the Internode MD noted that the rebate wouldn’t reduce the long-term cost to ISPs participating in the NBN. “It just gets us there from here,” he noted. Hackett has consistently called for the overall CVC charge to come down.

“What it does do is to eliminate an otherwise punitive set of access cost overheads that would otherwise be present from ‘time zero’ onward until the network is at a commercial scale (30,000 addressable customer premises per service area),” Hackett said.

“Those punitive access overheads were not accommodated in the pricing we’ve already announced. In other words, we had determined that announced pricing on the basis that this rebate or an equivalent was in the pipeline already.”

Several weeks ago, Internode became one of the first ISPs to launch commercial NBN pricing, with the company offering ‘bundled’ plans which come with a telephone connection and prices starting at $59.95 a month and ranging up to $189.95 for a plan with 100Mbps speeds and a terabyte of quota.

Although many of the plans are comparable in price to current ADSL services at similar speeds, the company’s prices have already been attacked by the Coalition, with Shadow Communications Minister Malcolm Turnbull claiming the pricing undercut the argument for the NBN.

Yesterday, Hackett said in the absence of the assumption of a CVC rebate or similar proposal, “the pricing would have ultimately been driven higher”.

What’s next?
Despite what appeared to be somewhat of an interim victory on the CVC issue, Hackett also hasn’t given up his ambition to change the other major aspects of the Government’s NBN initiative. Like the Government itself and some players in the industry, Hackett had advocated for a smaller number of points of interconnect to be built (locations where other ISPs connect to the NBN network).

The decision to go with 121 PoIs was made by the Australian Competition and Consumer Commission, and Hackett and others believe it will advantage major players like Telstra and Optus while disadvantaging smaller players. A number of wholesale providers have already started to market so-called NBN aggregation services — which will allow smaller ISPs to provide national services across the NBN through one aggregated point of contact. However, Hackett still believes the issue needs addressing as a whole.

“It’s also important to appreciate that the 121 POI issue – the second half of [Hackett’s analysis regarding the NBN pricing] – remains as another factor that will create upward pressure on pricing until or unless it is in turn adequately addressed by the ACCC or the government (the 121 POI decision is not the fault of, or creation of, NBN Co),” said Hackett yesterday.

“In other words, ‘one down, one to go’, in terms of making the access cost model truly a level playing field to all participants.”

Image credit: Internode

30 COMMENTS

      • Ah, what can you expect from these Gen Y whippersnappers. Replying “LOL” is just like coughing or winking or giving an ambiguous thumbs up.

        :)

        • Sorry I’ve had some fresh air now*. I’ll re-read the article and make a proper reply.

          *glue fumes do not inhale, yet the guy is laying lino in a meeting room here, in an aircon office enviroment so we are all getting high……..

  1. We should stop calling it the NBN or National Broadband Network. That’s Newspeak or Doublethink (see George Orwell’s novel 1984).

    It is actually 121 small separate networks.

    Call it the MLBN (Multi-Local Broadband Network) or something.

    • “Call it the MLBN (Multi-Local Broadband Network) or something.”

      If you’re going to use that definition, you could pretty much use it for internet connectivity in Australia today.

      • No, for normal Internet access in Australia, the local networks are connected to ISPs. ISPs run national backbones. ISPs peer. Everything is all connected together.

        The “NBN” is 121 networks that aren’t connected together.
        There is no “NBN” national backbone.

        The “NBN” is like building freeways inside an electorate, but not between electorates — because that would disadvantage the companies who have already built Toll-roads between electorates.

        To service their customers, a minor ISP now has to build their own freeway system between electorates, or buy a service from a Toll-road operator.

        • “No, for normal Internet access in Australia, the local networks are connected to ISPs. ISPs run national backbones. ISPs peer. Everything is all connected together.”

          “The “NBN” is 121 networks that aren’t connected together.
          There is no “NBN” national backbone.”

          NBNCo is building backhaul where there currently is none. They are also either purchasing/renting backhaul where such backhaul exists. There was quite some fanfare about the initial NBNCo’s first backhaul blackspot (Mt Isa) quite some time ago. Their implementation study has provision for up to 70000 km of backhaul. The “backbone” if you can call it that (because a switched network by definition doesn’t have one, possibly call it “core”) is the fibre’s between the POI’s, some of which is owned by NBNCo, some leased. So it comes down to your definition of “National”.

          “The “NBN” is like building freeways inside an electorate, but not between electorates — because that would disadvantage the companies who have already built Toll-roads between electorates.”

          This is true.

          To service their customers, a minor ISP now has to build their own freeway system between electorates, or buy a service from a Toll-road operator.”

          Only until their customers reach a certain tipping point where it become economically viable for the ISP to sidestep the Toll-road operator and talk directly to NBNCo. They can evolve up to it.

  2. Either way the prices for the NBn do appear too high when compared to what is paid now for ADSL. Of course greater speeds will be available but the expected prices for the NBN have been lower than what Internode is offering.

    On a side not… what is with Simon’s glasses, did he forget his own so is wearing his mothers glasses?

    GW

    • When compared to Internode’s current ADSL plans, they’re very similar ($10 difference I think?).
      But for that extra $10 you’re getting a more reliable connection, potentially higher speed (depends on your current connection) and lower latency.
      I’m with Internode now, I do a fair bit of online gaming and run a Windows Home server 2011 box with web access on a 10Mbps/800Kb connection, so for me that $10 would be well worth it (though I plan on going the full 100/40Mbps when its available to me).

      • Exetel’s pricing is actually more expensive on NBN then it is on ADSL2 for equivalent service (less quota on NBN as I showed in the other thread)

          • Blanket statement without consideration for different use cases and performance characteristics based upon factors like noise and distance from exchange.

          • The point was as you are totally aware is that saying a particular NBN Plan price that is less value than a ADSL2+ Plan which has more quota is justified because it has a higer speed is only relevant if the comparison is based purely on speed.

            Many are happy with ADSL1 1500/256 or 8000/384 because it gives them value at the price point they are seeking, high quota low price.

          • This was in btw comparison to the NBN 12/1 plans, and as everyone knows ADSL2 can deliver speeds of up to 25/1 (im not even going to bother comparing it with Optus/Telstra’s HFC)

    • GW: “On a side not… what is with Simon’s glasses, did he forget his own so is wearing his mothers glasses?”

      I don’t normally like to get that personal but as soon as I clicked on this article I decided to ask Renai if he had any other stock pics he could use in the future.

  3. GW I disagree with your comment about the prices being high compared to ADSL, ADSL has been out for how long?

    The NBN currently is on trials, so pricing can’t be really take into account with an already existing network(and regulated network).

    Why do people blindly think that NBN prices should be lesser than ADSL? it’s a new network, the money has to be repaid, people can’t always have their cake and eat it too, despite what Simon is arguing.

    Kinda funny how Internode isn’t going to pass on it’s savings, who’s really doing the debating? or the schemer?

    If Internode really where going to be neutral in this debate, you’d expect them to be more forthcoming, rather than trying to profit their way into the NBN.

  4. the essential difference btw Exetel and Internode NBN pricing is that Exetel’s pricing schedule is centred around a median spend of ~$60/mth (100GB), whereas Internode’s pricing is centred around a median spend of ~$80/mth (200GB).

    Internode’s pricing basically assumes that there is a broad market for their more expensive and higher quota plans ($100/mth for 300GB, $150/mth for 1TB). otherwise, they will lose a lot of subscribers to Exetel which offers more intermediate pricing points btw $35/mth and $75/mth. after all, Internode’s entry-level plan of $60/mth for 30GB is now super expensive (they used to offer 150GB for that price point) relative to Exetel’s intermediate plans.

    Exetel’s and Internode’s pricing are, otherwise, quite similar — main difference is Internode is positioning itself at substantially higher price points. someone’s right and someone’s wrong about median retail spend on NBN. going by Exetel’s comments that Internode’s prices are ridiculously expensive, i’m guessing Exetel is betting that the average subscriber spend won’t rise much.

    although Exetel has said that NBN pricing is more expensive than TW pricing, it’s not clear by how much. in any event, assuming their NBN retail pricing is sustainable, it seems that they’re not really passing the higher wholesale costs onto the consumer but are trying to recover it instead from higher gross margins on the faster ports.

    once the Telstra/NBNco deal is ratified and as unbundled (ULL) and bitstream (TW) pricing converges to unity, i suspect Bigpond pricing will drop further towards Exetel NBN pricing and subscribers will churn towards Bigpond in greater numbers. after all, the $11bln NBNco deal effectively gives Telstra a put option with a strike price of $3000+ for every Bigpond subscriber they transfer over to the fibre network. they will probably try to grab as many subscribers as possible from their competitors.

    more fun times ahead :)

  5. Internodes published pricing is so much higher than what iinet have published. I think that anyone looking at internode’s NBN pricing need to remember that they market themselves as a premium service provider, and that rarely means anything other than premium prices.

  6. Yeah… sure, sure, we all believe you Simon.

    Price gouging is your TM these days mate!

  7. I have body slammed King Kong Bundy weighing 454 pounds , and I will try to body slam Simon Hackett with his wallet in his pocket :)

    PS . Simon Hacket = 200 Pounds
    Simon Hackets Wallet = 300 Pounds

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