NBN may cut prices to reduce congestion

Angus Kidman 25 July 2017

Congestion_Shutterstock738

Management admits that broadband throughput is an issue, but how long will we have to wait?

There's a small glimmer of hope for anyone who has signed up for a National Broadband Network (NBN) connection and discovered that despite supposedly having a faster service, they can't actually reliably stream Netflix because of congestion.

In a new interview, nbn CEO Bill Morrow says that wholesale price cuts for NBN services are being contemplated to ensure consumers get the service they signed up for.

"What we are considering, and we are in consultation, is looking at a restructuring of the pricing mechanism," Morrow told the AFR.

"I am sympathetic with the many smaller retailers, in particular, who say I am stuck in this price war and I can't step up and raise my price to the end users. So, we are thinking can we restructure the CVC (Connectivity Virtual Circuit charge) and the AVC (monthly access charge) to have a minimum assurance of a certain quality of product . . . do we introduce a media streaming product?"

Stripped of the jargon, that means nbn (the builder of the NBN) wants to change the way it calculates charges to Internet service providers, which should result in them being able to buy enough capacity to ensure there isn't congestion at times of peak demand without having to charge their customers more. Check out our explainer on how CVC works if you want more detail.

Bill Morrow

Prices for CVC were lowered earlier this year, but only if providers purchased large amounts, an approach that benefits larger ISPs more than smaller ones. Morrow flagging a changed model is effectively a signal that the existing price cuts haven't done enough.

According to Morrow, just 15% of customers are experiencing congestion issues. The problem is that with 5.7 million premises connected, even 15% means that 855,000 people are getting an inferior service.

There's no firm timeframe for any pricing changes, so don't get too excited just yet. And while CVC pricing changes might help with congestion, they won't directly impact other problems that are in the NBN too-hard basket, such as premises being placed in "service class 0" and deemed too hard to install right now.

Until those changes come in, your best bet is to compare NBN plans carefully and make sure you check all the details before signing up. That should get easier later this year when the ACCC starts comparing speeds from various providers. Even when that happens, make sure you've shopped around—just sticking with your current provider may not be the best deal for you.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

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