Telstra seeks stronger NBN price controls

Telstra seeks stronger NBN price controls

Summary: Telstra has said that NBN Co's self-imposed limits on product price rises do not go far enough.

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TOPICS: NBN, Telstra, Australia
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Telstra has told the Australian Competition and Consumer Commission (ACCC) that NBN Co needs to cap every part of pricing for products on the National Broadband Network (NBN) in order to avoid price rises for end customers.

Telstra's comments came in a submission to the ACCC's review of NBN Co's revised special access undertaking (SAU). The document sets out the pricing and regulatory framework for the operation of the NBN for the next 30 years, and is designed to work hand in hand with the wholesale-broadband agreement (WBA), which sets out arrangements between NBN Co and access seekers selling broadband services on the network over a shorter period of time--at this point, one year.

NBN Co has frozen the wholesale prices for NBN products until June 2017, and will limit price increases per year after that to 1.5 percent less than the rate of annual inflation. But this is just one component of NBN Co's pricing, and the company also has a connectivity virtual circuit (CVC) that it charges to retail service providers to reserve specific bandwidth from the point of interconnect to the end-user's premises on the backhaul.

Telstra said that as the use of the NBN increases, with more bandwidth being used by customers over time, because there is no "global" cap on pricing for the CVC, this could cause prices for retailers, and ultimately end users, to go up over time.

"It creates the real possibility that wholesale prices are set such that RSPs [retail service providers] cannot supply services at retail prices that end-users would be willing to pay," Telstra said.

Telstra said a possible solution would be to introduce a global price cap based on the average wholesale price for end users, including an average of the wholesale price, CVC charge, and additional charges, and the price could change at a rate in line with inflation. Alternatively, Telstra said that the price cap could be applied to the total revenues over the total premises connected.

This would give NBN Co more flexibility over the sorts of products it can introduce and the prices for those products, Telstra said, but until a change is made, there can be no guarantee that prices will remain affordable.

"In the absence of any specific commitment in the NBN Co SAU, the general statement of intent from NBN Co is not sufficient to ensure that CVC pricing will evolve over time in a way that promotes the [long term interest of end users]. The ACCC should maintain oversight of CVC pricing, such that CVC pricing is subject to regulatory recourse."

This pricing disparity was also raised by Optus in its submission, stating that by customers using more data per month, the capacity "will result in higher prices over time as usage increases, and is inconsistent with current industry pricing structures." The telco warned that some products on existing plans would, as a result of NBN Co's pricing, either be too expensive or unfeasible for retailers to offer on the NBN.

AAPT said in its submission that the CVC charge should be locked for four year terms and defined more specifically within the SAU.

"It is crucial that NBN Co include in the SAU more specific commitments in relation to CVC price reductions. This should take the form of a commitment to a minimum reduction pathway if certain demand and usage forecasts are met. This is important as it could adversely impact investment and business model decisions of wholesalers."

Macquarie Telecom said that NBN Co's "statement of intent" to review CVC pricing on an annual basis was not strong enough, and that there should be a firm commitment by NBN Co to review pricing.

The ACCC is expected to make a draft decision on whether to accept or reject the SAU in March.

Topics: NBN, Telstra, Australia

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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11 comments
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  • Oh dear.

    Pot calling the Kettle Black methinks.
    Master_T[RG]
  • LOL Telstra.
    Hubert Cumberdale
  • The hypocracy

    It would take NBNCo 20 years at 1.5% to even reach to what Telstra charges ISPs now, and over 82 years to reach Telstra's proposed wholesale price on FTTN. F off Telstra.
    Pilfer-52cec
  • Says it all...

    http://delimiter.com.au/2013/01/30/the-irony-it-burns-telstras-nbn-price-complaints/
    RS-ef540
  • It is essential

    for Telstra to be able to protect its value to shareholders. Also, clearly RSP's in general are concerned about the NBN pricing strategies.
    Blank Look
    • The true colours...

      Start showing when such articles surface *rolls eyes*
      RS-ef540
  • Wot

    Mirror mirror on the wall
    Abel Adamski
    • Indeed

      Most succinctly put Abel
      RS-ef540
    • ? please explain

      I consider myself a commentator on these matters. The statement I made is true when you consider what Telstra and other RSP's need to do or know to stay profitable. That is the fact of the matter. I have no shares in Telstra, never have had any shares in that company or any other Telco, RSP.
      Blank Look
  • Gladly...

    It's not NBNCo's job to ensure Telstra or any other RSP's are profitable and certainly not their job to even consider these companies share holders or share price *sigh*

    It is NBNCo's job to oversee the NBN build and to offer "affordable connectivity to RSP's", which will allow RSP's to in turn, offer affordable access to customers "us".

    So inevitably it's NBNCo's job to look after us.

    The highly paid execs who run Telstra and the likes are the one's who need to manage, innovate and promote to gain patronage and thus make their business profitable/look after their share holders.

    it's quite simple really, so...

    Ever thought of becoming a tennis commentator?
    RS-ef540
    • Tennis ?

      Beach Volleyball ?
      Abel Adamski