All right team, it's time we had a chat about three little letters that have a massive effect on the price and speed of your broadband plan.
We're talking about "CVC".
It stands for Connectivity Virtual Circuit charge, and it was put in place by NBN (the company currently building your national broadband network). It's part of the wholesale price NBN charges retail internet service providers (like Telstra or TPG) to get customers, like you, onto the network.
Now, NBN is looking at changing CVC pricing (after overhauling the system earlier this year) to make prices more "attractive" for users.
But why does it need changing? And how does CVC have such a big effect on your internet experience at home?
What is CVC and how does it your affect speeds?
CVC is a virtual charge, so it's not actually based on infrastructure like metres of fibre-optic cable or copper wire. Instead, it's a cost ISPs pay to cover the bandwidth they make available to customers accessing the NBN. More CVC, more bandwidth for end-users getting on the internet. More bandwidth, fewer bottlenecks.
That's why the capacity ISPs pay for (essentially, how much CVC they buy) can have a massive impact on the speeds you get when you access the NBN.
Side note: The other part of the cost of an NBN connection is AVC, Access Virtual Circuit. AVC is the fixed cost of your individual connection to the network, while CVC is part of your ISPs overall capacity cost, which goes up or down on a sliding scale.
Think of AVC as your little internet car and CVC as a highway on-ramp. The highway might have a high speed limit, letting you and many others zoom up to 100 megabits per second once your internet cars (I'm sticking with this metaphor) hit the fast lane. But if your ISP only buys access to one on-ramp with hundreds of customers (underpaying for CVC), things might be fine for much of the day but you're going to hit a massive bottleneck in peak hour.
ISPs are essentially all buying the same wholesale broadband product from NBN, so this "on-ramp" capacity is often what sets different ISPs apart.
And it's where many Australians have had problems. If an ISP is being stingy with how much CVC it's paying for, its customers could find their "blazing fast NBN" blazingly inadequate when they're trying to stream Netflix after dinner.
The big problem is that we still don't know how much CVC each retailer is purchasing, so customers are left in the dark about the amount of bandwidth their ISP is really providing at peak times. And that matters.
It might look like you're getting a good deal when you switch providers, but that cheap monthly bill means nothing if there's not enough capacity when you go online.
The fight over CVC
Earlier this year,on the debate about speeds and wholesale pricing, raising the ire of ISPs.
"We have roughly a million and a half homes that can have the technology to give a gigabit-per-second service capability today. We have a product that we can offer the retailers should they want to sell it," Morrow said on a company results call. "But they have chosen not to offer that to the consumers... I will presume it's because there isn't that big of a demand out there."
The ISPs called "bullshit." Quite literally.
Aussie ISPissued the expletive against NBN, saying that while the wholesale product might be there to offer Australians crazy-fast gigabit speeds, it would be prohibitively expensive to buy off NBN.
"There has been a lot of media hype recently about if there is a demand for 1 Gbps speeds," MyRepublic Australia Managing Director Nicholas Demos told CNET. "MyRepublic believes there is -- if 1 Gbps speeds are fairly priced for the Australian household."
From June 1 this year, NBN changed the way it charges ISPs to access its network, providing discounts to specific ISPs based on how much capacity they buy, and how many customers they have (rather than using industry-wide averages). The idea is that resellers get rewarded with deeper discounts the more capacity they buy, opening up higher speed tiers and providing a better NBN experience for all.
In late October, Bill Morrow told a Senate estimates that this wholesale pricing was under review, though it could take two years for new pricing to hit the market.
That means ISPs could get a new incentive to offer customers the bandwidth they need (both now and in the future). After all, we paid for the NBN, we should be able to get the most out of it that we can.
First published Feb. 17, 1:48 p.m. AEST.
Update, Nov. 1 at 11:18 a.m.: Adds additional details, including information about CVC pricing review.
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