NBN Co will halve the price of its basic NBN service, cut prices on most other plans, and phase out usage-based pricing under the terms of a Special Access Undertaking (SAU) that the ACCC agrees will protect consumers from “sharp price rises” through to 2040.

Internet service providers (ISPs) reselling 12Mbps, 25Mbps, 50Mbps fixed line and fixed wireless services will pay no more than $55 in the coming financial year regardless of how much data they use, NBN Co explained in outlining the terms of its latest SAU variation.

The SAU manages the ground rules by which the wholesale network operator engages with ISPs and, by extension, their customers – who should see prices changing once the new framework is implemented from 1 December 2023 in the form of a revised wholesale agreement between NBN Co and ISPs.

Acceptance of the new pricing structure “is great news for customers and marks the start of an important new era for the Australian telecommunications industry,” NBN Co chief regulatory affairs officer Jane van Beelen said in announcing the ACCC’s acceptance of the latest proposal.

Two years of close collaboration with industry, the ACCC and government had helped NBN Co “develop regulatory processes and establish a sustainable future course for wholesale prices and service standards,” van Beelen said, noting that the changes “will deliver greater cost certainty to retailers and significant long-term cost savings for customers” compared to current pricing structures.

ACCC commissioner Anna Brakey agreed, noting that the latest proposed SAU variation – the third such proposal floated by NBN Co – “promotes the long-term interests of Australians [and] results in greater price stability, keeping prices in line with inflation and protecting consumers from unexpected sharp price hikes.”

Among its many terms, the new SAU will eliminate contentious usage-based Connectivity Virtual Circuit (CVC) charges from high-speed NBN Co plans and reduce CVC charges on mid-speed tiers in the run-up to a complete transition to flat-rate wholesale pricing by 1 July 2026.

CVC charges – a usage-based cost that ISPs pay on top of the flat-rate Access Virtual Circuit (AVC) fee they pay for every NBN service they sell – have been contentious in an industry where commercial realities have forced ISPs to restrict the amount of capacity they buy.

This, in turn, has created congestion during times of peak usage – particularly for 100Mbps and faster fibre services capable of quickly downloading massive amounts of data.

That is particularly problematic as NBN Co expands the footprint of fibre services – the company this month announced that over 700,000 Victorian households are eligible to access fibre upgrades – but the imbalance should be progressively eliminated as ISPs, given more certainty around their costs, can finally access enough bandwidth to support customer requirements.

“The move to AVC-only pricing for NBN 100[Mbps] and higher plans will make faster broadband more accessible to more Australians,” a “thankful” Aussie Broadband managing director Phillip Britt said in welcoming the end of “two years of discussions and negotiations”.

Ensuring universal access to the NBN

Two previously proposed agreements have been knocked back because they would have increased broadband prices significantly – a potential consequence that in January saw the Albanese Government formally instruct NBN Co to focus on “upgrading and improving” its network rather than trying to bolster prices in preparation for a sale to private markets.

With the third proposal now accepted, lower and more predictable wholesale pricing should boost competition among ISPs that have historically struggled to differentiate themselves given the need to buffer themselves against unpredictable CVC costs.

ISPs will have more room for profit margins and discounting when NBN Co drops the wholesale price of entry-level 12Mbps services to $24.40 per month – 25Mbps services will cost $26, while popular 50Mbps services will cost at least $50 – and NBN Co will only charge them CVC for the amount of bandwidth that is used, rather than forcing ISPs to prepurchase capacity based on guesses about how much they will need.

“These changes are intended to encourage more efficient use of the NBN rather than materially increase NBN Co’s revenues,” Brakey said.

This, in turn, should see customers offered a broader range of options – including low-priced entry level plans that will help ensure that even lower-income homes can access the benefits of the national network.

Even as NBN Co undertakes to ensure that its Low-Income and Digital Inclusion Forum engages with member organisations and industry groups, the government also contemporaneously announced the creation of a new National Referral Centre (NRC) – to be administered by Anglicare Victoria as part of the School Student Broadband Initiative (SSBI) – to ensure that even low-income families can connect to the NBN.

SSBI – which allows families with school-age children to nominate themselves for free Internet connections if they currently have no NBN service, and live somewhere where they can access a standard NBN service – has connected over 4,000 households since its February launch, with an additional 18,700 connection vouchers issued for redemption with participating ISPs.