Aussie Broadband warns of possible peak speed cuts when CVC holiday ends

At the present time, the retailers of the National Broadband Network (NBN) are enjoying a 40% capacity boost at no charge, but that boost is set to end next month.

Once the boost is lifted, Aussie Broadband said retailers will need to pay for the extra bandwidth now consumed, since users have embraced the internet for more things than they did at the start of the year, such as working from home.

"NBN's extra 40% CVC bandwidth to cope with peak demand during COVID certainly cushioned the impact, but once it's gone, we don't believe traffic levels will return to original forecasts," Aussie Broadband managing director Phil Britt said. "Given that telcos pay overage for CVC usage above the amount bundled into their NBN wholesale products, this puts them in a difficult situation.

"They will either need to raise retail prices to keep the service levels the same in peak time speeds, or lower peak time speeds to maintain at least some level of margin -- which is almost non-existent as is."

Britt said the past few months have shown the NBN can handle the lift in traffic, and without the CVC holiday introduced in March, network speeds would have been "significantly impacted".

The solution, according to Britt, is not to extend the holiday, but to bin the CVC capacity charge since the bandwidth consumed is now outstripping bundled predictions when NBN changed its pricing last year. "While usage continues to rise every year, and NBN still charges for bandwidth volume in the form of CVC, providers have little choice but to raise retail prices or reduce service levels," he said.

"I believe that we need to scrap CVC and move to a single access charge based on the speed tier chosen, with no usage or CVC component. Not only does it simplify everything, but it also gives telcos more certainty in how they can set prices.

"Many other countries operate this way, including New Zealand. CVC is something that appears to be unique to the Australian market."

A recent report from the ACCC showed as of the end of March, total capacity purchased on the network grew 40% to 17.8Tbps, while the average capacity per user grew 31% to 2.5Mbps.

Looking at traffic and capacity graphs and history from Aussie Broadband -- which is one of the few to publicly disclose capacity and usage at each NBN point of interconnect -- the retailer did not jump all-in as soon as the offer came into force. Instead, it steadily ramped up throughout April, a period the ACCC report did not capture.

A 40% jump in CVC is the sort of growth the network normally experiences across a full year, but it happened in the March quarter alone, with more capacity to be expected next time.

Shadow Communications Minister Michelle Rowland previously raised the prospect of what happens once the CVC boost is taken away.

"The question from here is how do we transition CVC pricing to a new normal in a fair and economically responsible way?" she said. "Hastily undoing the capacity boost would be problematic given this could force up prices or lead to congestion.

"For this reason, Labor would prefer to see a considered transition of NBN capacity pricing in consultation with retail providers, informed by traffic trends as COVID-19 restrictions wind down."

Britt warned that if the CVC remains in place, retailers will have to push customers onto alternative services, such as a mobile network.

"If it remains, I strongly believe we will soon be back to the early days of NBN when providers either skimped on CVC so customers experienced woeful peak hour speeds, or they had to charge prices higher than many customers were willing to pay, or they concentrated on customers who were not large users of bandwidth," he said.  

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