IA concerned over NBN's new pricing model

The new wholesale pricing model adopted by the NBN could further reinforce the market dominance of existing large operators, Internet Australia has warned.

On Friday, nbn announced it is adopting a new discount model for its Connectivity Virtual Circuit (CVC) charge — the wholesale cost nbn charges its retail service provider customers per megabit of bandwidth for each connection.

Under the new model, the CVC charge will be calculated based on the average bandwidth per customer of individual retailers, rather than the industry average as a whole. It is designed to automatically decrease the price of a CVC as the average number of virtual circuits per end user increases.

Retail ISPs using the NBN have frequently complained about the way the CVC is calculated on the grounds that it serves as a disincentive against offering higher-bandwidth services, because it becomes more financially lucrative to offer lower-speed services.

The new model appears designed to address these concerns, and nbn said it has been developed based on extensive feedback from the industry.

But Internet Australia Executive Chair Anne Hurley expressed concern that the new model could fly in the face of one of the stated original aims of the NBN — improving competition in the supply of broadband services — by disproportionately benefiting larger players.

“The idea was that we’d see a wide range of small to medium-sized retailers, mostly existing ISPs, able to better compete with the larger operators. This new pricing scheme could have the exact opposite effect,” she said.

“The concern we have is that we will see the bigger operators on better rates than their smaller competitors. In the end this could just reinforce the market dominance of the existing large players.”

Despite NBN’s assertion that the new model was developed in consultation with the industry, Hurley said IA had not been contacted and neither, to the industry body’s knowledge, had any of its NBN retail service provider members.

“If nbn only talked to a limited range of operators then I suggest they failed to observe the spirit of the minister’s undertaking to see that the industry was consulted,” she said.

The development is particularly notable in light of nbn CEO Bill Morrow’s controversial comments last week that Australians don’t want superfast broadband speeds and wouldn’t take up the services even if nbn offered them for free.

Image courtesy of Dushan Hanuska under CC

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