PDF Consultation Paper Pricing Evolution - May 2017

“Pricing Evolution” Industry Consultation Paper May 2017

Commercial-in-Confidence

“Pricing Evolution” Industry Consultation Paper

“Pricing Evolution” Industry Consultation Paper PDF-0175 May 2017

Copyright This document is subject to copyright and must not be used except as permitted below or under the Copyright Act 1968 (Cth). You must not reproduce or publish this document in whole or in part for commercial gain without the prior written consent of nbn. You may reproduce and publish this document in whole or in part for educational or non-commercial purposes as approved by nbn in writing. © 2017 nbn limited. All rights reserved. Not for general distribution.

Disclaimer This document is provided for information purposes only. The recipient must not use this document other than with the consent of nbn and must make its own inquiries as to the currency, accuracy and completeness of this document and the information contained in it. The contents of this document should not be relied upon as representing nbn’s final position on the subject matter of this document, except where stated otherwise. Any requirements of nbn or views expressed by nbn in this document may change as a consequence of nbn finalising formal technical specifications, or legislative and regulatory developments.

Commercial-in-Confidence © 2017 nbn | ABN 86 136 533 741 Page 2 of 5


1. Consultation Purpose In February 2017, nbn published a close-out paper for CVC pricing, outlining the move to the CVC Dimension Based Discount by RSP construct effective from June 1st 2017. As part of this paper, nbn shared its intention to engage further with the Product Development Forum (PDF) participants later in 2017 to explore potential nbnTM Ethernet pricing options. The purpose of this consultation is to seek inputs from all PDF participants as part of nbn’s on-going pricing evolution approach and to deepen our mutual understanding of challenges and opportunities of the current pricing construct. Where a PDF participant has addressed some or all of the questions in their previous submission there is no need to resubmit that feedback, but nbn would welcome any further elaboration or comment.

2. Pricing Considerations nbn has several considerations in reviewing its pricing approach in both the short and long term as part of nbn’s on-going pricing evolution approach. These include: 

On-going feedback from service providers regarding nbn’s existing pricing approach (the pricing construct, price levels and the degree of certainty regarding future price movements, particularly how the total prices will change as end user data usage increases over time)

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The likely effect of the pricing approach on end user take-up and usage of various speed tiers

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The opportunity to achieve an industry-wide collaboration to improve end user experience and create value for RSPs and nbn

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nbn’s non-discrimination obligations, and

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nbn’s financial commitments.

3. Request for further feedback In light of the above considerations, nbn would like to receive further feedback from participants to explore the impact of the current pricing construct on RSP product design, as well as explore how the current nbn pricing construct could be evolved.

3.1 Understanding the impact of the current pricing construct nbn’s current AVC/CVC pricing construct was designed to give RSPs the highest practical level of control over service contention and cost predictability, while relying on market forces to find the balance between end-user experience and retail price. This section aims to explore whether these design objectives have been achieved. Question 1: How does nbn’s current AVC/CVC pricing construct and CVC rebates impact the retail customer experience of products your organisation offers to market? Question 2: How does nbn’s current AVC/CVC pricing construct and CVC rebates impact the design (speed mix, data caps and pricing) of the retail products your organisation offers to market?



Question 3: How does nbn’s current AVC/CVC pricing construct and CVC rebates impact customer uptake? Question 4: How does nbn’s current AVC/CVC pricing construct impact the attractiveness of selling nbn services?

3.2 Explore options for alternatives Having explored the impact of the current design in section 3.1, this section aims to explore how the construct could be evolved. While nbn welcomes any suggestions in this section, respondents are encouraged to generate ideas with clearly demonstrable success criteria that focuses on: RSP sustainable economics and flexibility to differentiate in the market, nbn sustainable economics including achieving IRR targets, and maximising end-user experience and value for money. Ideas that do not exhibit these characteristics, for example where they involve a write down of nbn’s debt owed to the Government, are unlikely to be practical or able to be readily implemented. Question 5: If your organisation could redesign nbn’s pricing construct in any way that provided more value to all parties (RSPs, end-users and nbn), how would you do it? If you answered question 5, please elaborate with questions 6-7: Question 6: How does the proposed design provide extra value to each party, and does this value change over time? Question 7: Do you expect the proposed design to materially change the mix of speed tiers and data caps your organisation’s customers purchase, and if so, what do you expect it to change to? Question 8: Which challenges would the introduction of a new nbn pricing construct present to your organisation? Question 9: What would the impact to your organisation be if the nbn’s pricing construct simply remained the same, and under which circumstances would your organisation find this outcome preferable? Question 10: Do you see any changes in what your organisation needs from nbn’s products and pricing during the building of the network compared to what you will need from nbn’s products and pricing after the build is completed? Question 11: Are there any specific changes in technology, applications or end-user preferences that your organisation would see as particularly important to include in an analysis when considering an evolution of the nbn’s pricing construct?

3.3 Quantitative data for solution modelling As part of this consultation, nbn will endeavour to model the impact of different solution proposals. To ensure that the models align as closely with RSP expectations as possible, this final series of questions aim to calibrate specific inputs of the modelling process. Question 12: What is the current CVC capacity that your organisation apportions per end-user service, and how does your organisation arrive at this value? Question 13: What is the current CVC capacity apportioned per end-user service differentiated between AVC speed tiers?



Question 14: What growth do you expect in CVC usage per end-user service in the next two years, and what is the major driver behind this growth?

4. Next Steps - Responding to This Paper nbn invites written submissions from PDF Participants by 5.00pm on Friday, 9 June 2017. PDF Participants should provide their comments via their PDF Web Tool private workspace. Unless advised otherwise, nbn intends to make a summary of the general themes contained in submissions received available to all PDF participants via the PDF Web Tool. In parallel with this consultation, nbn welcomes the opportunity to meet with PDF participants individually, to discuss your submission in more detail and obtain feedback, or if you would prefer to meet rather than make a written submission. nbn will contact your organisation to arrange meetings. In the meantime, you can email [email protected] to request a meeting.


PDF Consultation Paper Pricing Evolution - May 2017

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