NBN cuts prices to get you to upgrade your broadband

NBN has announced a major pricing overhaul which it hopes will cut the price of NBN plans, give Australians better broadband speeds and reduce congestion on the network.

It's one of the most significant changes to how NBN sells broadband access to telcos and, as a result, a change with potentially huge implications for people paying what they feel is too much for a dodgy broadband connection.

Until now, NBN charged ISPs two fees: one to get users connected to the network (AVC) and then another scaling charges based on bandwidth ISPs allocated to each user (CVC). It was a slightly complicated system (though we put together a nifty explainer here) but one of the major problems was that it allowed ISPs to skimp out on paying for extra bandwidth, leading to bottlenecks.

Now, NBN is combining those two fees into one price and cutting the amount ISPs pay to get customers connected to higher speed plans.

What's changing?

The wholesale cost of the 50Mbps speed tier will fall 27 percent while the cost of the 100Mbps speed tier will fall 10 percent (compared to what retailers are currently paying for those plans). It is also roughly doubling the capacity for each user connected to the network, and dropping the cost ISPs pay to buy additional capacity for users (this will fall about 40 percent). The changes come into effect in the second quarter of 2018.

NBN has a few key goals with the new pricing:

• Step1: Encourage ISPs to connect customers to higher speeds
  
• Step 2: Increase bandwidth on those higher speeds so users get a better experience
  
• Step 3: Reduce the incentive for ISPs to scrimp on paying for extra capacity
  
• Step 4: Get more Australians to be a little more stoked with the NBN
  
• Step 5: Profit!
  

So why the shake-up?

Right now, the majority of Australians are on speeds of 25Mbps or less and according to NBN, this means they're not getting the full benefits of the network.

To give you an idea, consumer group Choice rates 25Mbps as "the lowest category of what's deemed to be 'fast broadband'." It lets you stream video and browse the web, but things will really start to stall as soon as you try to stream HD Netflix or get multiple people in a house using the web at once.

For gamers, families with YouTube-addicted kids or even those who want to stream in more than standard definition, 50Mbps is the real sweet spot. But NBN says only 16 percent of Australians are paying for speeds of 50Mbps or higher. 

Plenty of Australians who should be on a higher speed aren't. And according to NBN CEO Bill Morrow, their experience is suffering.

"Australians are funding this world-leading infrastructure, and the majority of them, as end users, are purchasing plans that give them no better -- and in some cases lower -- speeds than they can get from their legacy network," said Morrow. "We would like to see the NBN 50 plan (50Mbps download speeds) become the 'new normal'."

For those who just want the NBN for voice calls (and the occasional email), NBN is reducing the cost of its entry-level 12Mbps speed tier.

What next?

The big question remaining is whether or not ISPs will pass on the discounts. NBN is hopeful; after all, ISPs will want to lure more customers with cheaper prices and the promise of a better experience.

Speaking to CNET ahead of the pricing review, MyRepublic Australia managing director Nicholas Demos said any push to make it cheaper for ISPs to offer 50 and 100Mbps speed tiers was ultimately good for the industry and Australians wanting a better internet experience.

And for any ISPs not yet convinced, NBN has introduced a wholesale discount, selling its 50Mbps speed tier for the same price as 25Mbps with a 50 percent increase in bandwidth. The deal will run until NBN gets its new plans into market.

Most of all, NBN is hoping the new pricing will help Aussies get a better NBN, even while accepting ISPs (and people signing up to plans) are largely focused on price. 

Here's hoping the NBN finally can get faster and cheaper sooner.