Telstra has warned using National Broadband Network funding to provide alternatives to its own rural infrastructure may lead to increased costs and other problems.
"The proposal for duplication ... is unlikely to address underlying economic issues and may make implementation of the National Broadband Network (NBN) more complex and costly," Telstra wrote in its 16-page submission for the government's Regional Backbone Blackspot program consultation.
It reminded the government of its obligations under competitive neutrality policy which would apply to the NBN Company and requires government-owned businesses to provide a commercial return on their investments, while pointing out its own networks offered excess capacity available for sale.
"On this basis, dividing existing demand in a low population area across two pieces of infrastructure could realistically result in higher rather than lower prices," Telstra said.
Instead, Telstra said government funding should be directed to the "extension of the fibre transmission network into under-served areas", outlining 140 remote communities that could be connected if the government followed Telstra's advice.
Telstra's submission acknowledged the complaints of ISPs over wholesale pricing in regional areas it serviced; however, if it was made a government responsibility it may provide cheaper access, which it could address by buying in-aggregate and on-selling capacity to ISPs or for it to subsidise ISP costs.
"There is potential for the government to provide lower transmission prices by either purchasing capacity from Telstra's existing network and reselling it at a subsidised cost to access seekers, or by acting as a demand aggregator and negotiating on behalf of interested access seekers," said Telstra.
Telstra maintained the problem ISPs face in regional areas was due to the "price tensions" between wholesale transmission and retail services, but noted the Australian Competition and Consumer Commission had never intervened specifically into pricing arrangements in areas where there were fewer than three providers.
Telstra also said the government's $250 million regional backhaul program — in light of the government's hope for Telstra to "vend in" its existing networks to reduce the $43 billion cost of the NBN — had jumped the gun since its NBN implementation study, and regulatory reform was likely to impact future arrangements.
"The government's proposal to duplicate transmission infrastructure is pre-empting the outcome of its implementation study," said Telstra.
"It is likely the private sector will not be able to make any commitment in this regard until the government completes its implementation study and regulatory reform review."