NBN Co runs into trouble on cheap gigabit plans

NBN Co’s plan to cut the price of 250Mbps and gigabit services looks to be coming unstuck as retailers grapple with the total cost of making them work, and how to market them safely to hybrid-fibre coaxial (HFC) users.

One of the the key proposals in NBN Co's recent wholesale pricing review is to slash the uplink speed of 250Mbps and 1Gbps tier services in order to make them more affordable.

NBN Co has claimed its proposed pricing will result in steep discounts of up to 68 percent at the wholesale level.

While retail service providers (RSPs) are supportive of attempts to bring high-speed services into the reach of users, they’re unconvinced what is on the table will allow them to do it.

In particular, there are concerns that the amount of connectivity virtual circuit (CVC) bandwidth that these plans come with isn’t nearly enough to guarantee performance anywhere near the headline speeds, particularly during the evening peak.

CVC is the shared pipe where traffic is exchanged between the retail service provider (RSP) and NBN Co networks.

Most new plans on the NBN come bundled with an amount of CVC bandwidth, but this often isn’t enough to guarantee the performance of that user’s connection in the busiest time of the day. That means RSPs must buy extra, called ‘overage’.

NBN Co is proposing a 250Mbps product with an initial 4.75Mbps of CVC, increasing to 5Mbps in May 2021; and an “up to” 1Gbps product with an initial 5.75Mbps of included CVC, growing to 6Mbps.

The company believes this is overly-generous and is pitching the excess bandwidth as a gift to RSPs that can then be shared with other users connected to each PoI.

RSPs, however, aren’t convinced the plans come with enough CVC to avoid costly overage fees.

That could mean the plans remain off-limits for most users, rather than widely accessible to fibre and HFC users as NBN Co seems to want.

Aussie Broadband predicted that take-up of services above 100Mbps would still be “significantly limited” by the amount of CVC required to offer them.

“Aussie Broadband currently sells NBN plans up to 250Mbps, however these plans are limited to CVCs with at least 1Gbps of bandwidth provisioned,” it said in a submission obtained by iTnews.

“This rule is in place to ensure customers are able to receive the full speed of their service at all times, and the risk of a single connection causing CVC congestion is far higher the less bandwidth is available. 

“We also limit these customers to a data limit, rather than offering unlimited services. 

“In order to support a 1000Mbps residential plan with either generous or unlimited data options (with peak use expected between 7pm and 11pm) we believe providers would need to limit these plans to CVCs with at least 5Gbps of bandwidth provisioned. 

“Immediately this makes these plans only accessible to the big RSPs with enough capacity to support these plans at each PoI [point of interconnect].”

Aussie Broadband also said a provider would need “between 500Mbps and 1Gbps of spare CVC capacity” on top of this “for these plans to be able to achieve their full speeds, thereby incurring an additional $484,000 in overage charges each month.”

“As a result, these plans are unlikely to be viable for the majority of RSPs to offer to consumers in the first place, let alone for customers to pay the significant premium that would be required to support these plans,” it said.

Aussie Broadband considered it “likely” that it would offer high-speed services at launch, “provided current CVC bandwidth issues are addressed and there is full support for these products through the B2B interface”, where RSPs place orders for NBN connections.

“Given the limited use-case for these plans, however, it is unlikely we would market them directly to end users,” it said.

“Instead we would likely provide information on our website and via our call centre that these plans are available on request.”

In a submission of its own, Telstra likewise indicated support for the 250Mbps and 1Gbps changes, but asked for the amount of CVC that came included with the plans to increase, albeit by a modest 250Kbps a year for 250Mbps and 500Kbps for up to 1Gbps services - "to reduce relative overage risk."

The Australian Communications Consumer Action Network (ACCAN) saw NBN Co’s proposals for 100Mbps and above services as “a material step forward in serving the needs of the premium consumer market”.

However, like the RSPs, it was also concerned that the amount of CVC they came with was undercooked, and therefore prices were likely to remain high.

“We remain concerned that the CVC inclusions offered for the 250Mbps and up to 1Gbps wholesale speed tiers would be insufficient to make the service constructs feasible without considerably greater expenditure on overage per connection,” it said.

“As a consequence, although generally supportive of the reduction in pricing of these services as outlined in the consultation paper, we believe that the proposed construct will not be appealing to retailers and will not be marketed to consumers.”

NBN Co tests minimums

NBN Co appeared to at least recognise the potential for very high speed plans to underperform, even if it may have underestimated the severity of the impact. 

In addition to the main wholesale pricing inquiry, NBN Co is running a side consultation on just the high-speed plans, for which consultation materials have not been made public.

A request to release that paper was formally refused.

One of the questions in the high-speed plans consultation asked RSPs for their “thoughts on NBN Co mandating a minimum 1Gbps total CVC capacity per CSA [connectivity service area] for your organisation to offer [1000Mbps services], potentially with an increase in minimum provisioned bandwidth before overage is paid on bundled discount services in a CSA (currently set-up at 300Mbps).”

What to do about HFC

Though the 250Mbps and up to 1Gbps were touted as being for the fibre-to-the-premises (FTTP) and hybrid-fibre coaxial (HFC) footprints, NBN Co’s second consultation paper mentioned only in passing that there could be issues providing gigabit speeds over HFC.

However, the issue is directly canvassed in the separate high-speed plan consultation.

“To help protect the shared end user experience and manage capacity, what is an acceptable ‘typical’ or ‘prevalent’ maximum information rate on the layer 2 wholesale service for [up to 1Gbps] on HFC to drop to (accepting it will always burst to 1000Mbps at some point during a day), and why?” NBN Co asks.

That suggests an up to 1Gbps plan might have to be marketed differently to users depending on what access technology they have.

Unsurprisingly, RSPs saw this as needlessly complex.

“If there are limitations in the ability of the HFC network to support a genuine 1000Mbps service, NBN Co should revise the … product such that a lower headline speed (e.g. 750Mbps) can be delivered to HFC (and FTTP) customers under the same conditions and with the same expectations as other NBN services,” Telstra suggested.

Aussie Broadband agreed: “We would prefer a separate speed tier (ie 500Mpbs download) that is available on all technologies including HFC, and the fastest speed tier (ie 1000Mbps) is only available to eligible fibre services.”

NBN Co says there is a path to gigabit speeds on HFC; it just isn't available yet.

The future of 1000/400Mbps

NBN Co also put a question mark on the future of the largest wholesale tier it currently offers - a 1000/400Mbps product.

It appeared to suggest that its suggested 1000/50Mbps product become the biggest product available - but Aussie Broadband, at least, sought a stay of execution on 1000/400Mbps. 

“Aussie Broadband believes the 1000/400 speed tier is potentially still relevant for enterprise users, particularly given the rising popularity of SD-WAN solutions for larger businesses,” it said.

“Given NBN Co’s push into the enterprise market is only in its infancy, we would recommend maintaining the 1000/400 tier for the time being and re-assessing uptake over the next 24 months.”