Friday, 30 July 2021 17:24

NBN $5.2M COVID relief credit Featured


NBN announced that it will offer a COVID-19 relief credit payment totalling $5.2 million across eligible internet retailers to support the provision of additional data to meet increased customer demand for broadband services during the lockdowns in New South Wales, Victoria and South Australia in July 2021.

NBN said that it has made significant investment over many years to ensure the NBN network has sufficient capacity and additional headroom to accommodate long-term growth in data demand. The network continues to perform well under the incremental increase in data demand of recent weeks.

NBN executive general manager commercial Ken Walliss provided the following points:

  • NBN acknowledges that customer data demand has incrementally increased as more states have gone into lockdown. However, the additional capacity required to accommodate these increases have been partly accommodated by NBN Co’s introduction of National Pooling of Connectivity Virtual Circuit (CVC), the additional capacity inclusions in May 2021 and the Focus on Fast campaign.
  • The credit payment, which will be made on a proportional basis to eligible retailers, is designed to reduce retailers’ additional wholesale data overage costs brought on by the incremental increase in usage during the peak evening entertainment hours and to help to ensure they do not fall short of their customers’ data demands during lockdown.
  • To assess the size of the support, NBN Co took into account the long-term annual growth rate of data of around 25 per cent and the average spend on data overage costs in FY20. The $5.2m payment across all eligible internet retailers is intended to help bring retailers’ data overage spend back in line with both baseline costs.
  • NBN Co has been supporting the industry to accommodate normal annual growth in data demand through significant rebates and additional data inclusions introduced during the company’s Wholesale Pricing Review 2021, and we continue to pursue wholesale pricing reform through the current Special Access Undertaking Pricing Review 2021.
  • NBN Co’s provision of additional data across most speed tiers and the introduction of national CVC pooling, which makes the procurement of CVC (capacity) more efficient for all internet retailers, and increases in the number of customers using higher speed tiers, has seen overage as a percentage of retailers’ total wholesale costs steadily fall, and is now under 5 per cent across the industry.
  • From 3 August 2021, internet retailers will receive the COVID-19 relief credit, which covers the month of July, and will be allocated according to each retailer’s share of Industry Total National Overage, which represents the additional capacity purchased over and above the total included capacity for wholesale bundle discount speed tiers. The offer will apply to all TC4 nbn services on Bundled CVCs.
  • NBN Co will also be waiving charges for any breaches of the CVC utilisation conditions from utilisation on 25 June 2021 to 31 July 2021. In addition to the credit payment, NBN Co will be launching a SuperFast Plus rebate offer next month to retailers to help them support customers needing higher speed plans.
  • NBN Co’s previous offer of additional capacity at no additional costs to internet retailers, which was in market from March 2020 and transitioned out by 31 January 2021 was originally intended as a short-term measure to assist retailers’ adjustment to the initial increase in customers’ data consumption at the onset of COVID restrictions. It was the right thing to do at the time, but it came at a cost, some of which was borne by taxpayers. If this had continued, it would have potentially impacted NBN Co’s ability to invest in network upgrades to deliver faster speeds and additional capacity to meet the historical annual growth in data demand," Wallis said.

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NBN said, "We recognise the importance retailers place on minimising overage costs and we are exploring how we can continue to support the industry and customers. We are discussing this further with retailers as part of the current ongoing pricing and Special Access Undertaking consultations."

On receiving the credit notification, a Telstra spokesperson said, “NBN Co’s small one-off credit is insufficient. It doesn’t ease the burden that retailers are carrying.

“With millions of Australians still dealing with the impacts of COVID, we continue to see higher than normal demand for data in areas impacted by lockdowns. To meet this demand, we have increased the CVC capacity we buy from NBN Co as traffic has increased 30-40%.

“It is disappointing that in a time when we’re trying to support customers to stay safe, retailers are left having to pay more while NBN Co are reaping a financial benefit.

“We need an approach to pricing that enables retailers to provide the data our customers need, when they need it, without retailers facing ever-increasing costs.

“Connectivity is more important than ever and we should all be aiming to help people benefit from the nation’s investment in the NBN, not taxing them as data use goes up,” the Telstra spokesperson concluded.

NBN provided the follow points on data demand:

  • As the industry wholesaler, NBN Co has the full picture on daily data demand and the volume of traffic that transits across our network.
  • NBN have generally seen the largest increase in data demand during the first week of any lockdown, with data demand then stabilising and reducing as restrictions ease.
  • Following the introduction of lockdowns in both New South Wales and Victoria, national data demand across the nbn™ network peaked at 20.39 Tbps on the evening of Saturday 17 July, an increase of approximately 8 per cent from the previous week.
  • Daily and evening data demand has subsided from the peak that was recorded the weekend two weeks ago. Last weekend, on the evening of Saturday 24 July, national data demand across the nbn™ network was 19.93 Tbps.

Optus vice president of regulatory and public affairs Andrew Sheridan said, "Whilst we appreciate nbn’s gesture, it falls short of Australian’s needs at this time. It will mean that NBN continues to benefit from additional revenue driven by lockdown traffic growth. We continue to call on NBN to step up to the challenge that Australians are facing at this time.

"Note that what we are asking for – the additional capacity – doesn’t cost nbn anything," concluded Sheridan.

There continues to be considerable tension between the RSPs and NBN.  I maintain that RSPs are squeezed between a market not willing to pay substantially more for the MTM NBN and an NBN Co that is required to pursue a business plan to deliver on the 3% ROI. Tier two telco margins are substantially lower with NBN than under the past ULL arrangements, and margins for Telstra are likely even lower.

Further the complicated pricing, discounts, and other mechanisms make managing NBN complex for RSPs.

I continue to maintain that NBN's SAU variation is an attempt to de-risk their business plan.

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