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CVC growth outstripping NBN premises added for quarter to June: ACCC

In a turnaround on the last two quarterly wholesale reports, data capacity is ahead of premises in terms of growth.
Written by Chris Duckett, Contributor

The Australian Competition and Consumer Commission (ACCC) has said National Broadband Network (NBN) users saw an average 10 percent increase in connectivity virtual circuit (CVC) capacity acquired per user across the NBN for the quarter ended June 30.

The data is contained within the ACCC's sixth Wholesale Market Indicators Report, and shows that while the total number of premises on the network increased by 21 percent, the amount of CVC purchased by retailers grew by 31 percent across the network.

"CVC is an important component of how retailers provide enough capacity to deliver the speed of services they have sold to their customers, particularly during peak periods," ACCC chairman Rod Sims said.

The ACCC said it is looking into whether NBN needs to provide more information related to the amount of CVC purchased by retailers, and the utilisation of the capacity purchased, to the competition regulator.

"The ACCC considers that further information in relation to CVC utilisation rates would assist the ACCC to monitor the development of competition over the NBN and enable it to perform its regulatory functions," Sims said.

However, while an increase in CVC purchased would be welcome by users suffering contention issues, the average capacity for each user on the network has only moved from 1Mbps to 1.09Mbps, according to the ACCC.

Last month, NBN CEO Bill Morrow hit out at corner-cutting ISPs when he revealed that the average bit rate per user on the network is approximately 1Mbps.

"Under our pricing model, that could be doubled to 2Mbps for each end user for around an extra AU$5 per month," he said.

Morrow said retailers are involved in a land grab for market share where pricing is the focus, and not speeds or quality of service.

"If an RSP doesn't price their product high enough to recover their costs, they may be forced to cut corners that could affect the quality of the services being offered," he said.

"If an RSP isn't purchasing enough CVC capacity to offer the quality expected, that is a conscious choice to do so.

"Some RSPs are advertising broadband plans for as low as AU$29. When you consider the minimum AVC [access virtual circuit] cost them AU$24 for a 12/1 speed and they have to apportion a cost of the CVC charge, every expense must be as low as possible to make any kind of profit, if at all."

Sims said previously that retailers have blamed speed issues on the CVC charge.

"For RSPs, the answer was clear. The general view we heard (from both large and smaller RSPs) was that with current CVC pricing, many were reluctant to sell these services," Sims said last month.

"That is, far from consumers not wanting higher speeds, RSPs were often not seeking to sell them, at least not at prices consumers are willing to pay. We heard their view that AU$60 per month is the average price point in the market for NBN services."

Last week, the ACCC said it would prefer NBN and the retailers to come to an agreement on how to handle CVC pricing, but, should that fail, it stands ready to make a call on pricing.

"The ACCC acknowledges the ongoing industry concerns about NBN Co's pricing, particularly the level of CVC prices," the regulator said.

"The ACCC considers these concerns have the potential to impact competition in downstream markets and end-user experiences. Further, there is a risk that these concerns will continue and may even be magnified as the NBN rollout continues and usage increases."

Elsewhere in the report, the trends set in previous reports continued. The number of users on the two slowest speed tiers available -- 12/1Mbps and 25/5Mbps -- increased to 83.7 percent of all users, with 25/5Mbps now making up 55.1 percent.

Telstra has remained dominant in fixed-line NBN broadband, slightly increasing its share to 51.3 percent of all fibre-to-the-premises (FttP), fibre-to-the-node (FttN), fibre-to-the-basement (FttB), and hybrid fibre-coaxial (HFC) users.

During the quarter to June 30, the number of FttN users connected was 275,500; HFC saw 90,000 connections added; and 44,700 and 10,000 FttP and FttB users were added, respectively.

In July, the ACCC said it expects to see a number of telcos in court before the end of the year over the use of misleading speed claims.

"What we want to see is retailers moving away from unhelpful and easily misconstrued claims like 'up to', 'boost', and 'superfast', and from advertising and/or providing information about theoretical maximum speeds that are based on wholesale inputs.

"We want to see consumers presented with information based on the realistic speeds they can expect to experience, particularly during busy periods. Not just best-case scenarios."

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