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NBN Co offers start-up rebates for providers

Responds to entry cost concerns

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NBN Co, the company building Australia’s National Broadband Network, has responded to concerns that its services price small ISPs out of the market, announcing tariff rebates for capacity charges during the start-up phase.

The network has been criticized by some for setting prices on “Connectivity Virtual Circuits” (CVCs) that would make it difficult for smaller providers to achieve a national footprint. A good backgrounder, by Internode’s Simon Hackett, can be found here.

The problem stems from the service structure offered to retailers. The NBN is an access network only, connecting premises within a Connectivity Service Area (CSA), with services concentrated at a Point of Interconnect (PoI). The CVC provides the link from the CSA to one of 121 PoIs scattered around the country.

When the network is rolled out nation-wide, a retailer seeking a national footprint would, therefore, have to buy its access connections to premises; a CVC from each CSA to the PoI; and finally, backhaul – from existing carriers with long-haul networks, such as Telstra, Optus, Nextgen Networks and others – from the PoIs back into its own network.

In this announcement, NBN Co is responding to the cost of the CVCs. In each CSA, the first 150 Mbps of traffic back to the PoI will be rebated until the network passes 30,000 premises in that area.

Just how much CVC capacity a retail provider will need is going to depend on three things: how many customers it connects in an area; what plans those customers are using (from 12 Mbps at entry level up to 100 Mbps); and the amount of contention the retailer decides is suitable for its customer base.

Internode and iiNet have both supported the new arrangement as allowing retailers to build the necessary scale to bear the cost of CVCs. ®

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