Providers warn of post-COVID NBN price rise

While Australians have adjusted to the new norms of social distancing, working from home, and staying indoors, the COVID-19 pandemic isn’t over. But despite most of us spending more time indoors and online than ever before, it’s looking likely that we’ll soon need to choose between higher NBN prices or slower broadband speeds.

NBN provider Aussie Broadband has warned that as safeguards designed to ‘congestion-proof’ the NBN during lockdown begin to be removed, customers may face an unexpected price hike – especially if the increased data demands of the past few months continue.

Aussie Broadband: demand won’t drop, neither will prices

Back in March, NBN Co announced plans to temporarily allow NBN providers (telcos such as Telstra, Optus, TPG and iiNet) to purchase up to 40% more Connectivity Virtual Circuit (CVC) capacity at no extra cost. CVC is the fee a provider pays NBN Co to access bandwidth for customers, so by allowing retailers to buy more CVC for free, NBN Co essentially opened up the network to more users at once.

With data demands surging by between 10% and 20% on average over the last three months, this increase in bandwidth helped take the pressure off the broadband network at a time when millions of Australians were relying on home internet for work, school, and keeping in touch with family and friends. However, with NBN Co’s CVC boost set to end on August 19 – and internet use still well above pre-pandemic baselines – Aussie Broadband is calling on network bosses to take action.

Aussie Broadband Managing Director, Phillip Britt, said the telco’s own customers were using around 10% more bandwidth now than originally predicted before COVID-19 restrictions.

“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,” said Mr. Britt.

“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.”

Mr. Britt praised NBN Co’s decision to increase capacity during the pandemic, but called for the offer to be extended – or for CVC to scrapped altogether in favour of a single-access charge for each speed tier.

“Many other countries operate this way, including New Zealand. CVC is something that appears to be unique to the Australian market,” said Mr. Britt.

“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.”

NBN data use continues to surge

As parts of Victoria move back into lockdown, NBN Co reports that data demand in the state has already surged past the national average. From June 22 to June 28,  a 15%-20% increase in peak data demand was recorded in Victoria (when compared to pre-COVID downloads measured in February).

This spike in usage is on top of an overall download increase, likely due to major streaming services and social media sites beginning to boost video quality after lowering bitrate during the height of the pandemic. While this is great news for viewers wanting a return to ultra-HD quality Netflix, it’s a cause for concern for the NBN as a whole, as usage is showing no signs of returning to pre-pandemic baselines any time soon.

If telcos are forced to choose between raising prices or reducing speeds and performance, customers will suffer no matter what. Many Australians are already considering NBN alternatives, such as moving to mobile broadband or staying with their existing ADSL or cable connections for as long as possible.

Low-income and vulnerable Australians are likely to be the hardest hit, especially as the free or heavily discounted NBN relief packages offered to eligible families during the pandemic are likely to be withdrawn in the coming months. Vodafone’s free Essential BYO Plan is scheduled to end 30 September, with customers then forced to choose between moving to a $65 per month plan or cancelling their service.

Affordable and reliable NBN for low-income households is something that’s still missing in the telco industry, and the Australian Competition and Consumer Commission (ACCC) launched an official inquiry into the issue late last year. Between increased network strain, existing wholesale NBN pricing, and the possibility of across-the-board price hikes, Australian NBN users may need to prepare their broadband budgets for the months ahead.

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