Aussie Broadband flags the impact of usage 10% above predictions

Aussie Broadband believes that the telco industry will either have to increase prices or reduce service quality once NBN’s COVID CVC boost finishes.

Managing Director Phillip Britt said Aussie Broadband has seen its customers settle into a pattern of using about 10% more bandwidth than originally predicted pre-COVID, and believes this reflects permanently changed behaviour.

“Not surprisingly, people have become used to using their internet for more things and on more devices – whether it be working and schooling from home, streaming entertainment or shopping online or anything else,” said Phil.

“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 even without areas of the country going in and out of lockdown.

“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.”

Phil said the free CVC offer during COVID was a huge benefit to the nation.

“l believe the NBN saved both retail providers and the nation by doing this,” he said. “Without this additional capacity, peak time speeds would have been significantly impacted.

“Most providers are still provisioning large amounts of CVC and when the offer finishes in mid-late August, they will need to adjust back. I believe this will have an impact on peak time speeds because there isn’t any more to give without raising retail prices.”

Phil added that the retail market is so competitive that providers have made a rod for their own back.

“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.

Even if NBN extends its COVID CVC offer, he said, this is a band-aid solution to a deeper problem.

“COVID-19 has done three things. It’s shown that the NBN is capable of delivering a solid reliable service when our nation needed it most. It’s shown that the network can enable large scale working and schooling from home, and it has shown many people how to do new things and find new uses for the network that they may not have done before.

“But even without COVID, bandwidth usage is out-growing the predicted rates when NBN last updated its bundled CVC, and the next update isn’t until May 2021. Even then, the amounts proposed are only just going to cover the additional usage we are seeing NOW let alone in May 2021.

“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.

“However, 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.

“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.

“Alternatively, we will see telcos pushing customers even harder onto rival services, whether it be their own private networks or mobile. Something has to give.”