Why Aussie Broadband Warns NBN Prices Will Rise

Why Aussie Broadband Warns NBN Prices Will Rise

Your NBN is about to get more expensive, according to Aussie Broadband. The telco has warned that COVID-19 induced usage will see internet bills surge soon, and they’ve also teed off about NBN Co’s distribution of bandwidth to Australian ISPs.

This post was originally published on July 22, 2020.

NBN usage soared during COVID-19

Aussie Broadband has seen an unexpected rise in broadband usage during COVID-19. While it and other telcos expected an uptick, the amount of usage has been unprecedented.

Telstra confirmed daytime peak traffic on its network rose as much as 70 per cent compared to pre-COVID traffic. Superloop confirmed a 35 to 40 per cent rise in network traffic.

With a large number of people working and studying at home, this isn’t surprising. But Aussie Broadband doesn’t believe internet usage will drop, but become a permanent change in consumer behaviour.

“NBN’s extra 40 per cent CVC bandwidth to cope with peak demand during COVID certainly cushioned the impact,” said Aussie Broadband Managing Director Phillip Britt to Gizmodo Australia.

“But once it’s gone, we don’t believe traffic levels will return to original forecasts even without areas of the country going in and out of lockdown.”

TPG Telecom agrees.

“We have seen significantly increased broadband usage as a result of COVID-19, and it looks more and more likely that we are seeing long-term changes in customer behaviour,” a TPG Telecom spokesperson said to Gizmodo Australia.

What is CVC?

CVC stands for Connectivity Virtual Circuit. Internet Service Providers (ISPs) such as Aussie Broadband and Telstra pay a CVC charge to access a certain portion of bandwidth. The more they reserve the more speed they can guarantee their customers during peak hours.

NBN Co explains it in further detail here.

This is why NBN Co released an extra 40 per cent CVC to ISPs for free during COVID-19. More people at home meant more bandwidth was needed. Peak times have also been skewed since so many have been working and studying from home.

The impact of CVC

This extra 40 per cent CVC will expire in about four weeks, after already being extended once. And this is where Aussie Broadband’s concerns around higher NBN prices comes into play.

The ISP believes even if things were to return to normal, customer usage won’t. ISPs will need to buy more CVC to keep up with the shift in demand and speed. This costs them more, forcing price hikes to ultimately filter down to customers.

Considering the second wave of COVID-19 the country is  now facing, things probably won’t return to ‘normal’ anytime soon. Australians will most likely still need that extra bandwidth.

While NBN Co hasn’t confirmed anything yet, it could very well extend its CVC offering again.

“NBN continues to monitor demand on the network as well as the evolving situation with respect to COVID-19 and we expect to provide an update to industry in the days ahead,” said an NBN Co spokesperson to Gizmodo Australia.

Some telcos believe the extra CVC should be the new norm.

“We are urging NBN to make the additional 40% CVC permanent,” Andrew Branson, Managing Director of Tangerine, said to Gizmodo Australia over email.

“Telcos are between a rock and a hard place. Removing the CVC offer only leaves two commercial choices — increase prices or sell an inferior service.”

Superloop concurs. “We would hope, that as a government-owned entity [NBN Co will] do the right thing for their customers and the public and extend the offer if spikes continue,” a spokesperson said to Gizmodo Australia.

Abolish CVC, ISPs Argue

Even if NBN Co extended the CVC offer, or made it permanent, Aussie Broadband doesn’t believe this will fix NBN prices in Australia.

“Even if NBN extends its COVID CVC offer, this is only a band-aid solution to a deeper problem,” Phillip Britt said in an email to Gizmodo Australia.

“We need to scrap CVC altogether and move to a single access charge based on the speed tier chosen, with no usage or CVC component. This is how other countries, such as New Zealand, operate. CVC is something that appears to be unique to the Australian market.”

Britt also agreed that CVC is an artificial construct, as it is in no way tied to physical infrastructure.

“CVC is definitely an artificial construct. I make no argument against NBN charging retailers appropriately. NBN obviously needs to continue to generate income to continue to maintain and upgrade the network,” Britt said.

“I believe the best solution would be for NBN to charge a single fee covering both the monthly connection cost, and the bandwidth charge.”

When it comes to this belief, Aussie Broadband has an ally in Telstra.

“Given a lot of people will be continuing to work and study from home for the foreseeable future, we think it makes sense to extend the 40 per cent free allocation of CVCs for the locked down geographies for the time being,” a Telstra spokesperson said to Gizmodo Australia over email.

“Or, as we and others in the industry have called for previously, for NBN Co to look at removing the CVC pricing structure altogether.