NBN Co should pause capacity charges to prevent coronavirus congestion

Alex Choros - Managing Editor + Group Telco Editor

Last updated 16 March 2020

As more and more Australians work from home and socially distance to reduce the impact of coronavirus, NBN Co should temporarily stop charging for capacity on the National Broadband Network in order to prevent congestion.

NBN Co's capacity-based pricing model is the reason customers experience congestion on the NBN. Any provider selling an NBN plan has to first buy it from NBN Co. On top of a flat fee for access, all providers also pay for capacity on the network. This is known as CVC.

Telcos usually have to try and find the right balance between CVC and the price they charge their customers. Purchase too little CVC, and customers will experience congestion during busy hours. Purchase too much, and you won't make money selling your plan or be able to maintain competitive pricing.

However, with an increasing number of Australians beginning to work from home, the definition of peak hours is set to extend. Video meetings, remote file management, and more will all increase the amount of capacity being used on the NBN outside of the traditional peak hours of 7pm to 11pm.

Peak hours are set to become busier too, given that we have been advised to practice social distancing. With less Australians going out on an evening, you can be certain more of us will be checking out what we can binge on Netflix and Stan, or FaceTiming friends, in lieu of actual face time.

The main reason CVC exists is so that NBN Co can make a return on investment. Capacity on the NBN isn't limited - it isn't a road with a set number of lanes. But by charging for capacity, the NBN becomes one - and by proxy - prone to traffic jams. It's artificial scarcity.

CVC is a contentious topic at the best of times; many major providers such as Telstra, Vodafone, and Vocus (parent company of Dodo and iPrimus) have all previously spoken out against it. No one other than NBN Co is a big fan of it, even when everything is "normal".

But in light of a global pandemic, there's even more reason to dislike CVC. Telcos purchase capacity based on expected usage, but that's set to grow while their customer bases remain flat. As such, we're left with two possible outcomes. Telcos could end up forced to purchase more capacity to keep up with demand, which would hurt their revenue due to higher than normal usage. However, given the razor-thin margins many NBN providers operate on, more realistically we'll end up with a situation where increase online activity slows down everyone's connection.

Whether you're trying to use the internet during the day for work, or in the evening because there's nothing else to do, the outcome isn't great. It's hard to be productive when you're fighting a poor connection. It's frustrating trying to stream a new show only to endure constant buffering. And of course, we need to ensure that anyone attending an online appointment with a doctor is able to do so.

COVID-19 has put us in uncharted territory, and it demands an unprecedented response. Internet access is an essential utility at the best of times, let alone during a pandemic. Australians deserve reliable connectivity more so than and ever, and to ensure this, NBN Co needs to the right thing and temporarily axe capacity-based pricing.

Alex Choros

Managing Editor + Group Telco Editor | X | Instagram | Threads | LinkedIn

Alex Choros is the Managing Editor of WhistleOut Australia and an award-winning journalist. He's been writing about consumer technology for over a decade and is an expert on the Australian telco sector, to the point where he knows far too many phone and internet plans by heart. In addition to leading the WhistleOut editorial team, Alex is responsible for ruining the office Sonos with his troubled taste in music.

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