NBN Co may lower prices if overcharging

The National Broadband Network Company (NBN Co) has indicated it may lower wholesale NBN prices to retail service providers if its pricing model is overcharging carriers.

Since the release of the NBN business case in December last year, retail service providers (RSPs), such as Internode, have been wrangling with NBN Co over the method it uses to charge RSPs for services on the network. In addition to the end customer wholesale price, RSPs will also face prices for the physical connection to the NBN's point of interconnect and the end-user premise, and will also face costs of $20 per 1 megabit per second of bandwidth that the telco requires to service the end-user premise.

Internode founder Simon Hackett has led the charge for RSPs that have concerns over this model, saying that the model is structured in such a way that it makes it almost impossible for telcos with less than 20,000 customers to serve a national audience.

NBN Co's head of product development and sales Jim Hassell told ZDNet Australia that NBN Co had heard these complaints from the telcos.

"We talk to all of [the RSPs] and we talk to Simon [Hackett] on a regular basis about what their issues are and what they think," he said. "Doesn't mean we'll change every time, and sometime people will say something and they don't like it but that's how it's going to be. The consultative process is very important to us and very important to us to have an industry-wide agreement."

When the NBN rolls out and revenue starts coming in, NBN Co may adjust the pricing if it looks like they've overcharged the ISPs, he said.

"We've said that here are our assumptions about take-up and average revenues per user and those sorts of things, if we find that we have undercooked that and we generate much greater revenues than we expected, we would just reflect that in lower prices," he said. "We just need to get that amount of money to pay for what we're doing and pay for the network over that period of time."

In the NBN business case, the revenue model is calculated to include price decreases over time; however, the document notes that if take up is lower than expected, NBN Co would also have the power to increase costs in order to maintain the revenue it is expecting.

Hassell said the company would soon be in talks with RSPs on the final terms of the wholesale broadband agreement document, which, in conjunction with the Special Access Undertaking document submitted to the Australian Competition and Consumer Commission, will outline the products and prices for services on the NBN. Hassell said the contracts are expected to be released shortly.

"We'll release that out to industry and get the feedback on those," he said. "Those are the contracts on which service providers will sign to buy services off the NBN and it's quite a big deal."

Hassell also spoke in a ZDNet Australia panel at Salesforce.com's Cloudforce event on productivity in the cloud. See the video here.