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NBN points to Telstra taking 20% of its revenue in wholesale price debate

After receiving AU$2 billion this year, Telstra is forecast to receive AU$1 billion annually from fiscal year 2021 well into the distant future.
Written by Chris Duckett, Contributor

An NBN FttN node getting a Nokia line card installed

Image: Corinne Reichert/ZDNet

NBN has struck out at Telstra's complaints that the connectivity virtual circuit (CVC) charge that NBN puts on bandwidth needs to be scrapped and wholesale prices need to be cut by AU$20.

On Tuesday, Telstra CEO Andy Penn said it was unprofitable for retailers to resell the National Broadband Network (NBN) at current prices.

"An industry where wholesale prices result in zero margins for the downstream retail providers is unsustainable," Penn said.

"It will result in higher retail prices, reduced competition and retail providers looking for ways to bypass the NBN altogether -- which is bad for customers and bad for the industry."

NBN CEO Stephen Rue returned serve on Wednesday, describing the wholesale price debate as "the industry gnashing about NBN Co's pricing model".

Rue said it should be remembered that NBN is serving the entire country, and it is not just about capital costs, but also ongoing costs to keep it running.

"Let's not forget that the sum of all NBN Co payments to Telstra was around AU$2 billion this year," Rue said.

"Our Corporate Plan points to a continuing payment to Telstra for access to ducts, dark fibre and facilities of AU$1 billion annually from FY21, representing 20% of forecast revenues, and continuing for decades after the build is completed.

"This has an obvious impact on wholesale prices."

Telstra and NBN now have duelling reports to argue their cases. Telstra has stated that Australia is either the most expensive or second most expensive broadband in the world, and NBN's AlphaBeta study claims that Australia has the seventh most affordable broadband from 22 countries examined.

Last month, NBN suggested the introduction of 100/20Mbps plans.

At the 100Mbps speed tier, NBN currently offers 100/40Mbps plans.

"The new speed tier recognises that most residential customers download far more than they upload and a new product that prioritises download with an associated new wholesale bundle discount may help them to avoid paying a price premium for relatively high upload speeds that most customers do not use or require," the company said at the time.

In February, Vocus said it was exiting the NBN consumer space due to CVC being incompatible with the fixed rates paid by consumers.

At the same time, NBN announced the appointment of Will Irving as its chief strategy and transformation officer to replace its head of strategy JB Rousselot. Like Rousselot, Irving will arrive from Telstra, where he had spent 20 years, and most recently was group executive of Telstra Wholesale.

Irving left the telco in an executive clean out that included CFO Warwick Bray, group executive of technology, innovation, and strategy Stephen Elop, and group executive of media Joe Pollard.

Rousselot will remain with NBN until October, when Irving joins the government-owned telecommunications wholesaler.

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