What am I really paying for with my NBN plan?

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As the National Broadband Network (NBN) gets rolled out across the country, it – both as the company and the product – gets a lot of criticism for falling short of speed expectations. While this seems to be more of an issue for Fibre to the Node (FTTN connections, the question remains if retailers are doing their best to provide their customers with high-speed internet. The NBN’s problems are not always the fault of NBN Co.

With jargon-like acronyms such as ‘CVC’ and ‘AVC’ flying around, it can be tough to figure out where your money actually goes when paying for an NBN plan, and why your personal connection can be so slow. Canstar Blue disseminates the jargon, and where your money goes when paying for the NBN in this report.

What affects my NBN speed?

A number of things can affect your internet speed but the one scrutinised aspect of NBN recently is ‘CVC’. CVC is arguably one of the biggest factors affecting both how much your internet costs, and how fast it can go. CVC charges deliver decent insight as to what the NBN charges retailers for bandwidth – the key thing that can affect your internet speed.

  • CVC is a measure of bandwidth purchased, and NBN Co reduced its controversial charges from $21 down to $14.25 for 1Mbps
  • Purchasing 2Mbps costs $20.50 and 3Mbps costs $24, meaning retailers get more value the more they buy
  • This is the wholesale price passed on to retailers, who can easily purchase more bandwidth if they chose to, but the average purchase per customer was just 1Mbps
  • Optus and Telstra do not release how much average bandwidth they purchase for one customer

While this sounds incredibly low, the fact is not everyone is online at the same time. This means that if a telco has 1,000,000 subscribers, and only 250,000 are online at any one time, the end-user bandwidth is theoretically quadrupled. In reality, quite often not even a quarter of the total user base is online at any one time… except for peak times. Peak times – such as between 4pm and 9pm – when more people are on, the infrastructure is strained as bandwidth is shared among more people.

What do CVC and AVC mean in regards to NBN?

What do CVC and AVC mean in regards to NBN? CVC stands for ‘connectivity virtual circuit’ while AVC stands for ‘access virtual circuit’ and these two terms stand to dictate how much the NBN charges retailers, and consequently how much the end user pays for their NBN plan. These three-lettered acronyms can dictate how much you pay to your retailer every month, and may be an insight as to why your NBN connection is slow, or achieving nowhere near its advertised speed tier. To this day, a blame game exists between NBN Co and retailers as to NBN plans are often pretty slow, but the fact is, it’s a little bit of everyone’s fault – including the consumer.

Why don’t NBN providers buy more bandwidth?

It’s been well-reported in the media that providers could quadruple their speeds for “under $10”. While it is true there is a $9.75 difference between the purchase of 1Mbps and 3Mbps, if you multiply that by 1,000,000 subscribers – or more if you’re Optus or Telstra – then that’s a pretty penny to pay, especially if you’re a fairly small telco. Couple that with the fact that it’s hard to swallow paying more money for something that’s slower than ADSL and you effectively have a little storm in a teacup. While providers could theoretically charge just $10 or so more for each NBN plan, it’s never that simple, and no one likes seeing their plans get more expensive, especially when historically internet has gotten much cheaper!

Why does CVC cost so much?

CVC is relatively expensive per megabit of bandwidth in Australia because at the end of the day, NBN Co is a government entity and is repaying loans from the government as well as try to run a sustainable business to continue rolling out the NBN across the country.

  • The Australian Federal Government has invested $49bn into NBN Co, and it would ultimately appreciate a good return on that investment
  • Telstra & Optus have also received kick-backs from NBN Co in exchange for using their expansive HFC cable networks in capital cities

The Australian has reported that Optus receives about $1,400 per cable customer from NBN Co as compensation for using its network. So if you’re a HFC internet customer in a capital city on an Optus or Telstra plan, your pristine cable connection could now be run, or at least also used by NBN Co. These payments to private companies may also be why CVC charges are relatively high.

How can I get faster NBN?

Australia is still used to low-cost ADSL internet, and for the NBN to compete it may have to have higher prices in the short-term. Like anything technology-related, it’s always more expensive early on, but gets cheaper. Remember when a basic computer was $5,000?! In the early days of NBN, to get tip-top speeds you may have to spend more, and potentially much more than you’re used to paying on an ADSL plan.

  • The fastest FTTN speed tier currently available is 100/40, and most providers currently charge around $90 a month for unlimited data, but if you can get away with less data then you may be able to spend much less.

While you may only actually ‘need’ a slower speed tier, in this current internet situation it may be better to buy peace of mind and purchase more bandwidth from a provider. The cheapest providers to offer unlimited 100/40 NBN plans are MyRepublic, SpinTel, AusBBS and Dodo. However, no NBN speeds are guaranteed, so you may not even see 100/40 speeds regularly.

So even if you purchase a tip-top shiny new plan, you’re not guaranteed great speeds. So where does this leave us all? Luckily, there is a thing such as ‘contention ratios’, which basically means how much bandwidth in relation to subscribers a retailer has. Several providers claim to offer low contention ratios, meaning customers ultimately get bigger slices of the bandwidth pie, which may deliver faster speeds. Such providers are Amaysim, and Aussie Broadband.

  • Aussie Broadband explicitly limits subscription uptake
  • Amaysim – as a rather large company – uses its clout to offer more of its own POI (points of inter-connect) infrastructure to take control of its own services, instead of relying on Optus or Telstra infrastructure.

While you may pay a little more with these providers, if it’s superfast speed you crave, then it may be worth spending a bit more to watch that Netflix video without a hiccup. You may want to purchase the best NBN plan you can afford.

Will NBN speeds improve?

NBN Co reducing its CVC costs certainly helps, and like any new technology, costs usually come down after infancy stages. So, yes, NBN speeds may improve in the coming years, or you’d at least hope so.

  • This relies on NBN Co continually offering more enticing CVC costs to encourage retailers to buy more bandwidth, but this may be a hurdle due to the associated extra costs
  • Extra costs are then often passed onto the consumer, and no one wants to pay more for NBN than they did with ADSL for a comparable service

Since lowering its CVC charge, NBN Co has reported that there has been an 11 per cent increase in CVC purchased per customer, meaning retailers are purchasing more bandwidth. In the same report, Akamai – a content delivery and cloud computing company – also found there had been a 10 per cent increase in average internet speeds from 1 March to 1 June 2017. So, the news is not all doom and gloom, and like anything tech-related there are bound to be a few teething issues. If you’re currently experiencing woeful NBN speeds, you may want to purchase a faster plan, or the fastest one you can afford, and by shopping around you can stand to find some pretty good deals.

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