The NBN is offering internet providers a better deal on bandwidth if they buy in bulk, but will your ISP improve its service or just pocket the savings?

Unfortunately there's no magic bullet to fixing your NBN performance woes. Sometimes the NBN network is to blame, perhaps if you're on stuck on fibre to the node a long way from the node and hampered by flaky copper in the street. Other times sluggish broadband is due to your stingy retail service provider (RSP) skimping on capacity so there's not enough bandwidth to go around in your neighbourhood.

The NBN's new Connectivity Virtual Circuit (CVC) pricing model aims to deal with the latter by giving RSPs a discount when they buy more capacity per customer. In theory it sounds like a great idea, encouraging RSPs to be a bit less stingy with their bandwidth, but only if you trust the all the RSPs to do the right thing by their customers.

To your door

It gets a bit complicated, but in a nutshell your broadband connection is actually two networks. Your RSP such as Telstra, Optus or TPG runs backhaul links to the 121 Points of Interconnect (PoI) around the country – typically at your nearest telephone exchange – then the NBN network covers the final leg from the PoI to your home.

NBN makes RSPs pay a CVC charge on data passing through the PoI to and from the NBN network, which means RSPs need to decide how much capacity per customer they want to pay for. They naturally don't buy enough capacity to allow for every customer in that neighbourhood to use their broadband connection at full speed simultaneously, instead they buy just enough to ensure reasonable performance during peak hour.

If your RSP is too stingy then you get a performance bottleneck at the PoI, like a kink in a hose. The same applies if they skimp when it comes to backhaul capacity running to the PoI in your area.

Cutting corners

To look at it a different way, think of your RSP like a neighbourhood gym with 100 local members – it's obviously not going to buy 100 treadmills. Instead it buys 10 treadmills, knowing that's enough to cover demand for most of the day and hoping that the queues don't get too long during peak hour.

Of course in the cut-throat world of retail broadband, some RSPs cut corners more than others – especially the big players. They only buy five treadmills, relying on the fact that your average customer will put up with crappy service because they don't know any better and likely blame NBN for their woes. These stingy RSPs know that people who care about broadband performance will perhaps take their business elsewhere, but they don't care when they're fleecing the masses.

Under the new CVC deal, RSPs will get a discount when they buy more capacity per customer to ease congestion – making it cheaper for them to buy a few more treadmills to cover the peak hour rush. It applies to all NBN connections except SkyMuster satellite.

Abusing power

It's a nice idea, but what's stopping these RSPs just pocketing the savings while continuing to offer the same crappy service they've got away with for the last few years?

It depends in part on whether the new CVC deal will automatically grant them a discount even if they stick with their current levels of customer service. In the past every RSP paid the same CVC according to the average bandwidth of all NBN users, now it's calculated for each individual RSP – so some might go up and others down.

The ACCC plans to monitor real-world broadband performance and publish the results in order to shame RSPs into lifting their game, but it's hard to have too much faith in a consumer watchdog which still seems genuinely surprised when the price of petrol goes up before a long weekend.

Another possible outcome is that the big RSPs use the new CVC deal to temporarily drop prices in order to squeeze smaller players out of the market, then put prices back up after they've killed the competition. That's exactly what Telstra did back in the days of dial-up and DSL, abusing its power to set wholesale prices for competing ISPs which drove them to the wall with the ACCC slow to act.

Hopefully the way CVC pricing works should discourage this, as discounts aren't calculated on the total capacity purchased but rather the average capacity per customer. This means that a small RSP which is generous with its bandwidth in order to ease congestion should get a cheaper CVC deal than a big RSP which might purchase more overall CVC but is stingy when it comes to sharing it around. This should help level the playing field.

How is the NBN performing in your neighbourhood and where does the blame seem to lie for congestion woes?