NBN won't kill 1TB plans: NBN Co

Summary:The National Broadband Network (NBN)'s pricing structure will not lead to the demise of terabyte plans, NBN Co has said, because most Australians will stick to smaller plans that will average out the cost of high-use customers for retail service providers (RSPs).

The National Broadband Network (NBN)'s pricing structure will not lead to the demise of terabyte plans, NBN Co has said, because most Australians will stick to smaller plans that will average out the cost of high-use customers for retail service providers (RSPs).

In the ongoing debate about the NBN pricing structure on broadband enthusiast forum Whirlpool, many had raised concerns about the Connectivity Virtual Circuit (CVC) component of the NBN pricing that charges providers $20 per Mbps used, saying that the high number of users taking advantage of the NBN's high speeds would mean that 1TB plans such as those currently offered by ISPs would be not sustainable in the NBN world. NBN Co spokesperson Scott Rhodie yesterday again defended the company's method of pricing, stating that the network had been developed based on actual usage rather than potential usage.

"While it is true that data volumes used will grow over time, and some end-users will use significantly more data than the average, our network is dimensioned (and priced) to reflect aggregate usage levels. While some users today may well use 1000GB in a month, the relevant factor for any service provider is what the aggregate usage across their entire customer base is."

Rhodie said that the pricing model took into account that data usage would rise over time, but cited Australian Bureau of Statistics (ABS) data that said most fixed-line customers only download 11GB per month, and that many users didn't even use their allocated download limits.

"The key point here is that there is a significant discrepancy between the actual usage and the plans that customers can subscribe to. Research conducted by Market Clarity suggests that Australian internet users only use around 15 per cent of their monthly data allowance," he said. "If consumers did in fact use all their 1000GB per month services today then most service providers would not make a profit on these services."

"The only reason why service providers can offer these high plans is because not all consumers 'use' all their data."

He said that CVC worked on the assumption that RSPs would not be allocating every Mbps of bandwidth to every connection at once, ie, a house with a 12Mbps connection would not always be using all 12Mbps, so this traffic could be managed by the RSP as required.

"We don't envisage that most RSPs will dimension their service on the NBN in that fashion, as it will use additional resources and won't necessarily provide much benefit to their end-users. We assume that they will dimension their CVC based on the aggregate busy hour usage profile of their end-users," he said.

Rhodie again dismissed calls for NBN Co to adopt Internode CEO Simon Hackett's proposed pricing model that would rebalance CVC costs onto the basic wholesale cost (Access Virtual Circuit or AVC), because it didn't take into account the varied bandwidth usage over time.

"While this could be seen as a simple exercise of transferring revenue from the '$Y' basket to our '$X' basket with a small adjustment to our AVC price, this is not the case. Any analysis of what happens at a particular CVC capacity level and its implications for AVC price cannot be consistently extended beyond that specific example," he said. "Simply varying the CVC and AVC charges on one example may come out as net zero, but over time and across other speed tiers the net is far from zero [unless you make the AVC cost prohibitively high for some speed tiers]."

Topics: NBN, Broadband, Telcos

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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