A significant change has occurred in the way nbn trades its wholesale products to retail service providers (RSPs) – the retailers that sell connectivity to Australian consumers.

A new pricing model, announced earlier this month, has been designed to inspire greater competition in the marketplace by rewarding RSPs for doing more to improve the internet experience provided to Australian homes and businesses.

So, what is this CVC and how does it impact you, the person at home trying to answer their emails, shop online and maybe stream the odd movie?

What is the CVC charge?

The nbn™ network connects homes and businesses around Australia to 121 different locations called ‘Points of Interconnect’ or ‘POIs’. From those locations, various RSP owned and operated networks take over and connect the service to the World Wide Web, or even to another service within Australia. This final part of the journey travels through a system made of backhaul links.

On an individual POI, RSPs can choose how much bandwidth per end user service they purchase – nbn does not manage the ratio of purchased CVC bandwidth per end user service. RSPs may choose to have a higher or lower ratio depending on the retail offer they have in market.

However, in determining CVC price, nbn takes into account the ratio of CVC bandwidth purchased to the number of associated services RSPs buy.

How does the new CVC pricing model work?

The new CVC pricing model calculates a level of CVC discount based on an individual RSP’s average CVC capacity purchased per service.

The more CVC an RSP buys for its customers, the cheaper it gets (the higher the ratio of CVC per service the bigger the discount the RSP receives from nbn).

This new model works at any scale; it does not matter whether an RSP has a small or large amount of customers. The discount is calculated on the CVC ratio per service, so all RSPs can obtain the same level of discount, regardless of their size.

Why the new model?

The new model was introduced to further enhance RSPs ability to manage service quality provided to their end users over the nbn™ network.

This model enables RSPs, both small and large, to have greater control over their service experience and the cost related to that experience. It’s up to each individual RSP to make a judgement call on how much CVC at a Point of Interconnect it should buy to service its users in that area.

The RSP doesn’t assume every end user will be using their internet at the highest demand all day every day, so depending on overall usage the CVC can choose to be plentiful or restrictive.

This is why the CVC is so important. The speed of your internet connection can be directly affected by the amount of CVC your RSP has bought at your Point of Interconnect, versus the number of services that RSP has using the internet at the same time at that POI.

This is further impacted by how the internet is being used by those services – streaming a high-definition movie is an intensive use of the internet; answering emails is not intensive at all.

This new pricing model is therefore great news for Australian consumers. Now RSPs have more motivation to bulk buy the amount of internet bandwidth they have available to customers. nbn expects for these benefits to pass onto consumer and expect this to enable consistently better internet speeds for users of that RSP.

The good news is, between February – when nbn first announced the new discounting model – and June, there was an 11 per cent increase in CVC purchased per end-user on average on the nbn™ network.

The new model is proving to be a success.