Pricing Evolution Industry

Consultation Paper
May 2017

Commercial-in-Confidence
Pricing Evolution Industry Consultation Paper

Pricing Evolution Industry Consultation Paper PDF-0175

May 2017

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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 nbns 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

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Pricing Evolution Industry Consultation Paper

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 nbns 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
nbns on-going pricing evolution approach. These include:

On-going feedback from service providers regarding nbns 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)

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

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

nbns non-discrimination obligations, and

nbns 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

nbns 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 nbns current AVC/CVC pricing construct and CVC rebates impact the retail customer
experience of products your organisation offers to market?

Question 2: How does nbns 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?

Commercial-in-Confidence

2017 nbn | ABN 86 136 533 741

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Pricing Evolution Industry Consultation Paper

Question 3: How does nbns current AVC/CVC pricing construct and CVC rebates impact customer uptake?

Question 4: How does nbns 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 nbns debt owed to the Government, are unlikely to be practical or able to be readily implemented.

Question 5: If your organisation could redesign nbns 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 organisations 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 nbns 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 nbns products and pricing during
the building of the network compared to what you will need from nbns 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
nbns 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?

Commercial-in-Confidence

2017 nbn | ABN 86 136 533 741

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Pricing Evolution Industry Consultation Paper

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
pdf@nbnco.com.au to request a meeting.

Commercial-in-Confidence

2017 nbn | ABN 86 136 533 741

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