Many users of the NBN are reporting of slower than expected internet speeds. This is being reported in the press as well and is a frustration to users across Australia. There are a number of things that can affect this but there are some fundamental issues with the way that NBN charge for access to their network that I slowing our experience down.
For some commenters in the industry the main reason we are not seeing the fast speeds that the NBN Co have promised is due to their CVC (Connectivity Virtual Circuit) charges. This refers to the cost that NBN charge ISPs to provide bandwidth on the network.
It is important that ISPs provide enough bandwidth for users to use the network and stream content and do everything else they want on the internet. At the time of writing the CVC charge applied by NBN is $15.70/Mb. So, in theory if a customer wants to receive a 25Mbps internet service NBN would charge the ISP 25 x $15.70. This works out at $392.50. This is before the ISP has paid to transmit that data back from one of the 121 POI’s (points of interconnect) that NBN have designed. Also, not included in this is the cost of running the data equipment in each of these POI’s. Or the cost of transmitting the data back out to the internet (IP transit). It doesn’t include the cost to manage a customer, technical support or costs to acquire. As you can see there are a lot of costs ining and maintaining a customer on the NBN.
There are not many households who would be prepared to pay $392.50 per month for an internet service. As such ISPs are forced to provide NBN services that are affordable and in comparison to the ADSL services that households are comfortable and used to paying.
For an ISP to provide an affordable service they are only able to purchase certain amounts of CVC from NBN. Now, an ISP knows that not all of their users on the network will be using the Internet at the same time. This means that in theory users can share the CVC that has been purchased from NBN. The problems come at high demand times when more users than not want to use the internet. With todays’ use of data ever increasing these times are becoming more and more.
It’s a cost vs quality argument. It’s impossible to get the best service at the cheapest price. It simply does not work. What we then find is some providers catering for the value end of the market where users want an affordable service and other providers catering for the high end user experience and charge a premium.
At the time of writing NBN are publically saying that they need to change the way that they charge for access to their network. It is impacting them negatively and they need to do something to resolve this. ISP certainly don’t want customers complaining of poor speeds – the want happy customers, but with the demands for bandwidth ever increasing and NBN charging such a high amount it is hard for a balance to be struck.
We shall have to wait and see what comes out of NBN’s comments on the changes that they may make in the future.