nbn™ sweetens the deal for business and its own bottom line

Updated nbn™, the company building Australia's National Broadband Networ (NBN), has adjusted its wholesale prices so that retailers offering business plans get the same price relief as previously offered for the consumer market.

After many complaints about the cost of its backhaul services (connectivity virtual circuit, or CVC), nbn™ introduced a usage-based discount in April 2016, and in January this year followed that up with a new CVC pricing model.

Today, the company announced similar relief in the business market, saying that from October 2017 a spend cap will apply to its high-bandwidth business products.

The changes apply to its business-targeted Traffic Class 2 (TC2) service. TC2 offers the kinds of service guarantees business customers get from non-NBN providers, including committed information rate (instead of the maybe-megabits-per-second consumer speeds that so frustrate customers and regulators alike), and limits on latency, jitter, and packet loss.

The company's announcement says the new price book is designed to make business services more appealing to organisations in the 20-200 staff range.

Business services are important to nbn™'s future financials, as a way to help the company expand its Average Revenue Per User (ARPU). Currently hovering around the AU$43 per month mark, the company wants ARPU to approach $50 per month. Consumers alone can't delive that increase.

As part of the change, nbn™ says the new prices will “replace the nbn™ Business Ethernet (nBE) product that was previously scheduled to launch later this year”.

The Register has asked the company whether that suggests any changes other than pricing to the business product. We will provide an update if we receive a response. ®

Update: nbn™ has explained the change to its former business Ethernet product: "nBE was a new product concept that would have provided a single price per service. The service would have been uncontended (Traffic Class 2) with enhanced Service Level Agreements (eSLAs).

"The spend cap will provide a wholesale cap on nbn's existing Traffic Class 2 service, while providing RSPs the flexibility to manage their own contention and add eSLAs where appropriate."

There's an important point here: while retailers will be able to offer an uncontested business server, they can also create services with other contention ratios, still using the same wholesale service.

+Comment: We won't see the details of the new price book until the changes are launched, but nbn™ told industry newsletter Communications Day that discounts will range from 20 per cent to 70 per cent from lowest to highest bandwidth orders.

A glance at nbn™'s current price list (available here), that will still amount to a hefty premium for businesses.

A CVC of 500 Mbps – enough to support ten 50 Mbps committed access connections, which themselves cost $320 per month – currently costs retailers $8,750 per month.

Depending on the retailer's volume, that could be discounted to between $2,625 and $7,000 per month, or $262.50 to $700 per customer, per month.

These prices are wonderful, from the ARPU point of view – but whether they're attractive business services is another matter. Let's take the best case as an example: will businesses pay more than $500 per month for a 50 Mbps service?

That's attractive at the larger end of the market, but less so for a 20-seat business.

The problem for nbn™ is that Australian businesses skew small. The Australian Bureau of Statistics found nearly 200,000 businesses with 5-20 staff, compared to just over 50,000 in nbn™'s target 20-199 band, and only 3,800 with 200 or more staff in February 2017 Counts of Australian Businesses. There's no data on the typical size of those 20-199-seat-organisations, but Vulture South expects most will be a the smaller end of that range and find $5,000/month for broadband less-than-appetising, although if retail service providers bundle well the pain may ease. ®