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Telcos warn of price hikes, reduced service levels under NBN Co plan

NBN Co’s plan to continue using a much-hated pricing system will leave broadband customers paying more or suffering reduced service levels, telcos warn.

The government-run company sought industry feedback over its prices, but left telecommunications retail service providers (RSPs) deeply unimpressed, saying the broadband wholesaler’s proposed changes fell well short of reflecting Australia’s surging data demand.

The document sets out NBN Co’s proposed options for effective charges and connectivity virtual circuit (CVC) inclusions to April 2023.

The controversial CVC component of its two-pronged pricing structure is unique to Australia and determines broadband capacity for RSPs, who want it scrapped.

It’s effectively a variable excess data charge that the RSPs almost always wear as their customers stream content in torrents, now more than ever as the COVID-19 pandemic drags on.

In its call for feedback, NBN said increased working from home, education and home entertainment had increased the data being used outside of the typical evening peak hour, and as a result “headline usage figures may not fully translate into increased billable CVC charges”.

It flagged potential price hikes and modest increases to CVC capacity inclusions under one of two proposed options and retaining the long-loathed charges.

Aussie Broadband managing director Phillip Britt said usage continued to rise every year but NBN Co still charged for bandwidth volume in the form of CVC, leaving providers with no choice but to raise retail prices or reduce service levels.

Mr Britt said he was disappointed –that the proposals were “not even remotely close to what the company is looking for”.

“Due to the significant growth the industry has experienced in the last 12 months, and the fact that usage has not returned to pre-COVID levels, we believe that the proposed changes are wholly inadequate to support the needs of the RSPs and, ultimately, Australian broadband users,” he said.

He said Aussie Broadband’s margins were being squeezed as a result of the huge spike in average broadband usage, and the company proposed overhauling or scrapping entirely the CVC component.

Telstra said in its submission the CVC bundle capacity inclusions proposed by NBN Co for the next 24 months came “nowhere near to meeting this expected continued increasing customer demand for data”.

“The proposed pricing will continue to substantially increase the average costs to supply fixed broadband in Australia and perpetuate the need for retailers to make complex and uncertain CVC provisioning decisions, driving investment away from supporting the NBN and leading to poor outcomes for Australian consumers and businesses,” the major telco said.

“There must be a move to a better, lower-priced, NBN pricing structure that removes the fundamental disconnect between the current uncertain CVC/overage charge based regime and the affordable unlimited retail plans that customers demand.”

TPG Telecom also said it was disappointing NBN Co had “decided to persist with its flawed” pricing system until at least the second half of 2023 given the impacts of COVID-19 were ongoing and data usage continued to surge.

“TPG notes that NBN Co and RSPs have been having the same conversation about the inefficiencies and complexities inherent in the NBN two-part pricing construct since at least 2011,” the telco said.

“In the meantime, NBN Co continues to propose incremental increases in CVC inclusions that are inadequate in meeting growing end-user demand.

“The current pricing proposal adds to the ever-increasing complexity of NBN pricing, masking the ongoing drive to increase RSP costs per end user.”

TPG said NBN Co regularly insisted it had been progressively reducing its CVC pricing but that was a mischaracterisation, with the system cloaked in “subterfuge”.

All of the telcos applauded NBN Co, however, for its moves last year at the height of the pandemic.

NBN Co offered their telco customers 40 per cent extra network capacity free until November 30, which Australian Competition and Consumer Commission chair Rod Sims said had been vital to the network’s sustained performance.

“The telco industry has effectively come off 12 months of not having to worry about CVC, other than network traffic during COVID,” Mr Britt said.

“The NBN proved during the pandemic that it completely supported the needs of both the industry and consumers, and we’re looking for this support to continue. We believe this is in the interest of all Australians.”

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