NBN Co is pitching a new set of 100Mbps-plus plans to internet providers as a way to offset the rising cost to serve all users on the network.
The company hopes internet providers will be incentivised to sell new 100Mbps, 250Mbps and 1Gbps plans if those plans come with excess connectivity virtual circuit (CVC) bandwidth that can be shared among all users in a particular area.
As iTnews has previously discussed, traffic exchanged between the retail service provider (RSP) and NBN Co runs over a single CVC interconnect at each of the 121 points of interconnect (PoIs).
This means that while a 50Mbps retail plan comes bundled with 2Mbps of CVC and a 100Mbps plan with 3Mbps, all the CVC essentially goes into one pool where it is shared among all of the RSP’s users.
RSPs manage this pool of CVC capacity dynamically and, if certain usage thresholds are reached, will generally top up the amount of CVC available in the pool.
With 121 pools to monitor, this can be reasonably complex; Aussie Broadband, for example, uses a software bot to keep on top of the challenge.
One of the topics NBN Co is exploring in its wholesale pricing review is “capacity management” with respect to CVC provisioning.
NBN Co offered to monitor CVC provisioning on RSPs’ behalf, and automatically punch through orders for shortfalls, though that was fairly poorly received.
One solution raised by several RSPs was to allow RSPs to pool all their CVC - that either came bundled with plans or they purchased separately - at a national level.
Essentially, the idea would enable RSPs to manage bandwidth from one giant pool instead of 121 smaller ones.
“Due to the varying nature of our customer base in different locations we are currently paying for significant overage in some CSAs [connectivity service areas], whereas there are other areas where we have excess CVC bandwidth,” Aussie Broadband said in its submission to the first NBN Co consultation paper.
“A move to a national-based CVC aggregation will allow far easier management of CVC, benefitting both providers and end users.”
But NBN Co, it emerged this week, isn’t keen to rock the boat on the 121 PoI structure.
“NBN Co has based its business model and wholesale pricing constructs around the 121 POIs throughout Australia, which were set out by the ACCC in 2012,” NBN Co’s general manager commercial Ken Walliss told iTnews.
“Our latest proposed wholesale bundle discounts and additional capacity inclusions are based on RSPs continuing to purchase capacity to serve customers in CSAs aligned to each of the 121 PoIs.
“At this time, we have elected to focus on significant discounts and annual increases in capacity as the most direct and immediate way to deliver improvements to retailers and their customers’ experience of the NBN.
“RSPs are able to share unused capacity among customers within individual CSAs.
“However, we’re aware that some RSPs would like to see the introduction of aggregated, national pooling of capacity and we’re willing to explore this idea in future consultations.”
On the surface, that doesn’t help RSPs much with their CVC problems: they are still likely to face lumpy oversupply and under-supply on a PoI-by-PoI basis, opening them up to significant additional fees.
NBN Co believes the solution to this is to create a set of high-speed plans that come with enough CVC that it could delay the need for an RSP to buy more CVC for a PoI/CSA.
It is proposing to create a 110/20Mbps service with 3.75Mbps of CVC, a 250/25Mbps service with 4.75Mbps of CVC, and an “up to” 1Gbps product with 5.75Mbps of CVC.
NBN Co is also proposing moderate CVC increases on those plans every year, with a review of CVC inclusions once a year.
In an interview with iTnews, Walliss explicitly called out the potential for the CVC inclusions with these higher end plans to offset CVC demand by users in the lower tiers.
“I think the important starting point of this is around the pooled aspect of CVC,” he said.
“The CVC for each of the speed tiers contributes to the CVC allowance in each of the local areas.
“If you think about the higher speed tiers, 100Mbps and above, you can see how the CVC inclusion on those is significantly higher than what it is even for the 50Mbps and below.
“What that means is for RSPs as they start to upsell into 100Mbps and above, they're starting to get a lot more CVC coming through, and that - in part - helps to address the overall general increase in CVC [that RSPs are having to meet].”
It’s far from clear whether this would work in practice, and whether RSPs would be willing to stack each PoI with more 100Mbps+ customers as a way to defer extra CVC spend.
It could also simply be an over-engineered solution to a problem that already has an answer.
“Ultimately, we believe a national pool concept would be far superior,” Aussie Broadband managing director Phil Britt told iTnews in emailed comments.
Britt also raised concerns that the CVC allowance on the 110/20Mbps plan wouldn’t be enough to meet performance expectations from day one.
“We believe that some of NBN Co’s CVC allowances continue to be undercooked,” he said.
“As an example, if you look at the 110/20 plan - which we understand won’t go to market until next year - we think that usage patterns at that time will already be exceeding the included CVC of 3.75Mbps at that point.
“We would need to model out the included amounts in the higher proposed tiers, but at first glance they also seem to be undercooked.”
That’s an early bad sign for NBN Co’s idea: RSPs won’t get any aggregate CVC benefit from stacking users onto higher-end plans if the CVC allocations already cut it too finely.
Other RSPs contacted by iTnews also expressed reservations on NBN Co’s thinking, and instead pressed the case for national aggregation of CVC as the appropriate solution.
NBN Co is currently in a second round of consultation with industry on its proposals.
