A proposal by NBN Co to axe national bandwidth pooling in exchange for a cost cap on 50Mbps services has attracted little support from internet providers, who see it as a revenue grab and backwards step in negotiations.
Connectivity virtual circuit (CVC) pooling enables all CVC bandwidth that a provider buys to be pooled together, where it can be allocated to any service according to need.
Under this model, heavier users’ requirements for bandwidth may be offset by lighter users, who do not use or need their full allocation.
As Telstra explains, “If a 50/20 customer doesn’t use the internet one evening during the peak, then the CVC that their [provider] has purchased… can be used for a 12/1 or 25/5 customer who is.”
If the pool is removed, providers will no longer be able to meet bandwidth shortfalls for 25Mbps and 12Mbps customers, a cohort that includes the most price-sensitive users of the network.
“12/1 and 25/5 customers benefit the most from CVC pooling,” Telstra said in a submission. [pdf]
“Taking CVC pooling away will harm those customers the most.
“This means [providers] might not be able to sustain the retail prices they charge for 12/1 and 25/5 customers.”
Telstra called the proposal “a big backwards step”.
Aussie Broadband similarly sees 12Mbps and 25Mbps prices going up if CVC pooling is axed. Alternatively, it said, providers might give up on selling both tiers, as it would be uneconomical to do so.
“The 12 Mbps and 25 Mbps plans have low CVC inclusions, meaning that even ‘average’ use will likely drive the cost to the right,” Aussie Broadband said. [pdf]
“By nature of the lower retail cost of the 12 Mbps and 25 Mbps plans, the typical consumers skew toward lower-income households.
“These households will bear the impact of the price rises.”
Vocus [pdf] noted that, instead of being added to a national pool, any “unused bandwidth” by individual users “will be effectively ‘thrown away’.”
The effect of that would even hit 50Mbps pricing, Vocus predicted, “with an increase in cost of at least $1.50 per month” per active 50Mbps service.
Vocus added that it did not “forecast costs at an individual customer level” but would be required to do so if NBN Co axed national pooling.
“To be able to forecast costs under NBN Co’s proposed model, we would need to monitor each individual customer’s usage and attempt to predict their usage each month,” Vocus said.
It added that daily reports that NBN Co has offered to assist would not materially help.
Optus is also opposed to the plan but has broadly redacted its arguments [pdf].
As reported by iTnews last week, TPG Telecom is also against the proposal.
However, NBN Co’s proposal does have the support of Launtel [pdf], which likened the move to NBN Co going “halfway” towards flat pricing for the 50Mbps tier, something several providers wanted but were previously rebuffed on.